It quickly became the most popular article I have ever released.

That makes sense.

With markets remaining volatile and retirement becoming increasingly expensive, investors are searching for dependable investments capable of producing meaningful income.

Now that we are more than halfway through 2026, it is time to revisit the original list.

For each investment, we need to answer three questions:

1. How has it performed?

2. Is the distribution still sustainable?

3. Does the investment remain attractive today?

Let’s dive in.

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10. 🛢️ Energy Transfer (ET)

Current yield: Approximately 6.60%
2026 total return: Approximately 28.2%

Energy Transfer has been the strongest-performing investment on the list. Its unit price has increased approximately 24.2%, while distributions have lifted its total return to 28.2%.

Investors entered the year with an 8.08% yield, which appeared unusually high considering the strength of the underlying business.

Energy Transfer generated approximately $2.38 per unit of distributable cash flow in 2025 while paying around $1.34 per unit in distributions, providing substantial coverage.

The partnership has also announced three quarterly increases during 2026. Its payout increased from $0.3325 per unit to $0.3350, then $0.3375, and most recently $0.3400.

That marked its 19th consecutive quarterly distribution increase.

Most of Energy Transfer’s earnings are generated through fee-based infrastructure operations rather than direct exposure to commodity prices, making its cash flows more stable than those of traditional energy producers.

The valuation is less attractive following the rally, but the distribution remains well covered and continues growing.

9. 🎰 VICI Properties (VICI)

Current yield: Approximately 6.74%
2026 total return: Approximately -2.0%

VICI Properties has been one of the weaker performers on the list, but is still only down by 2%.

The decline has increased VICI’s yield from 6.39% at the beginning of the year to approximately 6.74%.

Despite the weak share-price performance, the company’s underlying fundamentals remain relatively healthy.

Adjusted funds from operations per share, the primary earnings metric for REITs, has continued to grow.

VICI has historically generated roughly 7% annual AFFO-per-share growth across several multiyear periods, with slightly lower growth projected through 2029.

The quarterly dividend has remained at $0.45 per share during 2026.

However, VICI has historically announced its annual dividend increase in September, and its AFFO payout ratio remains reasonable.

The main risks include substantial exposure to Las Vegas, gaming operators, and elevated interest rates.

Still, VICI continues collecting contractual rent, and its valuation has fallen while cash flow has grown.

I’ll be interviewing VICI CEO Ed Pitoniak in the coming days to dive deeper into the situation.

8. 📈 Infrastructure Capital Equity Income ETF (ICAP)

Current yield: Approximately 10.30%
2026 total return: Approximately 9.6%

ICAP has generated a 9.6% total return while maintaining a double-digit distribution yield.

Unlike many covered-call ETFs, ICAP does not write options across its entire portfolio.

The fund generally maintains option coverage on approximately 30% to 40% of its holdings, leaving a meaningful portion of the portfolio’s upside uncapped which allows the fund to take part in the upside.

Management focuses on companies with growing earnings, strong free cash flow, sustainable dividends, manageable payout ratios, and reasonable valuations.

It can then write covered calls on positions it believes are approaching full value.

ICAP has also increased its monthly distribution during 2026.

The fund began the year paying $0.240 per share, raised the payment to $0.245 in March, and increased it again to $0.250 by June.

A fund that yields double-digits, takes part in the upside, and grows dividends over time is an incredible combination.

The fund’s reported expense ratio appears unusually high because it includes financing costs associated with leverage.

Its underlying management fee is closer to 0.8%.

Little leverage is used, but it does add risk during declines.

7. 🏦 Ares Capital Corporation (ARCC)

Current yield: Approximately 9.93%
2026 total return: Approximately -0.7%

ARCC has seen a small total loss of only 0.7% so far in 2026-

But the VanEck BDC Income ETF is down over 9% this year.

It’s outperforming it’s peers, but the BDC market has been hammered this year.

The decline has increased ARCC’s yield from 9.39% at the start of the year to approximately 9.93%.

Ares Capital has maintained its regular quarterly dividend at $0.48 per share for five consecutive quarters, with healthy dividend coverage for a BDC.

The stock has also traded near or slightly below tangible book value.

At approximately 0.99 times tangible book value, investors are paying about $0.99 for every dollar of tangible net assets.

Historically, ARCC has often commanded a premium because of its scale, management team, and track record.

The primary concern is its roughly 24% portfolio exposure to software companies, which could face disruption from artificial intelligence.

ARCC remains a high-quality BDC, but credit performance deserves close monitoring.

6. 🛢️ Western Midstream Partners (WES)

Current yield: Approximately 8.00%
2026 total return: Approximately 24.1%

Western Midstream has been another major winner. Its unit price has increased approximately 17.1%, while distributions have raised its total return to 24.1%.

The partnership entered 2026 yielding approximately 9.16%.

A yield that high suggested the market was pricing in considerable risk, potentially including a future distribution reduction.

However, Western Midstream entered the year with:

• Investment-grade credit

• Relatively low leverage

• Healthy distribution coverage

• Growing distributable cash flow

The partnership increased its quarterly distribution from $0.910 to $0.930 per unit, representing growth of approximately 2.2%.

Management has also guided for at least $3.70 per unit in total distributions during 2026.

The market has now rerated the units (as we thought would be the case in 2026), reducing the yield to approximately 8%.

Although the valuation is no longer as inexpensive as it was at the beginning of the year, an 8% yield remains attractive for a partnership with investment-grade credit and a covered, growing payout.

Much of the undervaluation has disappeared, but Western Midstream remains fundamentally strong.

5. 🌿 NewLake Capital Partners (NLCP)

Current yield: Approximately 10.96%
2026 total return: Approximately 5.1%

NewLake Capital Partners has produced almost no share-price appreciation during 2026, but its substantial dividend has lifted its total return to 5.1%.

NewLake is a specialized REIT that owns properties leased to licensed cannabis operators.

Its largest risk has historically been tenant credit quality, as federal tax restrictions have prevented cannabis businesses from deducting many ordinary operating expenses.

A transition of cannabis to Schedule III could improve tenant profitability, free cash flow, and rent coverage.

That would reduce one of the most significant risks facing NewLake.

The company has maintained its quarterly dividend at $0.43 per share since the third quarter of 2024.

The dividend remains covered by adjusted funds from operations, and the company maintains a rare net cash position.

NewLake remains speculative, but its covered dividend, low valuation, and strong balance sheet create meaningful upside potential.

4. 💵 NEOS S&P 500 High Income ETF (SPYI)

Current yield: Approximately 11.81%
2026 total return: Approximately 9.4%

SPYI has generated a 9.4% total return while continuing to distribute income at an annualized rate near 12%.

The fund owns exposure to the S&P 500 and writes call options to generate additional income.

SPYI generally maintains options exposure close to 100% of the portfolio, so investors do sacrifice some upside in exchange for larger monthly distributions.

However, the fund typically writes out-of-the-money calls.

This allows the underlying portfolio to appreciate by a certain amount before the options begin limiting gains.

Monthly distributions have ranged from approximately $0.5104 to $0.5353 per share during 2026.

These payments naturally fluctuate based on the option income generated by the strategy, but fluctuate much less than its peers.

SPYI’s primary long-term risk is net asset value erosion. So far, however, the fund has participated in market recoveries while maintaining substantial monthly income.

3. 🏢 AH Realty Trust (AHRT)

Current yield: Approximately 7.85%
2026 total return: Approximately 11.6%

AH Realty Trust has been one of the most interesting winners on the list, with a strong total return to 11.6%.

The company was previously known as Armada Hoffler Properties and traded under the ticker AHH.

It officially became AH Realty Trust and began trading under the ticker AHRT on March 2, 2026.

The name change accompanied a broader strategic transformation.

The former business relied heavily on development and fee-based construction income.

After becoming over leveraged and reducing its dividend, management shifted it’s strategy dramatically.

Under new CEO Shawn Tibbetts, the company is:

• Moving away from volatile fee-based construction income

• Prioritizing recurring property-level cash flows

• Deleveraging the balance sheet and targeting higher-quality financing

• Focusing on fewer, better assets rather than growth for growth’s sake

AHRT has maintained its quarterly dividend at $0.14 per share throughout 2026.

Management has also indicated that the payout is now supported by recurring rental income rather than development fees.

The company also just released their latest quarters earnings, where they increased 2026 FFO guidance.

The turnaround is certainly taking place, but investors must continue monitoring leverage, AFFO coverage, property performance, and asset sales.

2. 🥈 Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

Current yield: Approximately 9.92%
2026 total return: Approximately 1.6%

PFFA’s share price has a total return of 1.6% in 2026 so far.

The fund has maintained its monthly distribution at $0.1725 per share throughout the year.

PFFA is an actively managed preferred-stock ETF.

Preferred securities sit above common equity in the capital structure, meaning preferred dividends generally must be paid before dividends can be distributed to common shareholders.

Preferred stocks can also offer higher yields than bonds issued by companies with similar credit quality.

Active management is particularly useful because many preferred securities are callable.

Issuers can redeem higher-yielding securities when doing so becomes financially advantageous, forcing passive investors to reinvest at lower rates.

An active manager can evaluate call risk (this is a big one), credit quality, interest-rate sensitivity, and relative valuation.

Keep in mind, this fund is a lower volatility income vehicle rather than a source of major capital appreciation.

1. 🥇 MPLX (MPLX)

Current yield: Approximately 7.25%
2026 total return: Approximately 14.4%

MPLX was my number-one high-yield opportunity entering 2026, and it has delivered very strong returns.

Its unit price has appreciated approximately 10.4%, while distributions have increased its total return to 14.4%.

Investors began the year with an 8% yield, and MPLX still yields approximately 7.25% after the rally.

MPLX recently reported Q2 GAAP earnings of $1.06 per unit, in line with expectations, while revenue increased 10.3% year over year to $3.31 billion and exceeded estimates by $170 million.

Management also reaffirmed its expectation for 12.5% distribution growth in both 2026 and 2027.

12.5% distribution growth for a company yielding above 7% is incredible.

With a yield above 7%, strong distributable cash flow, fee-based earnings, and double-digit distribution growth potential, MPLX remains one of the strongest income opportunities on the list.

📊 The Results

These 10 investments were selected independently and were not designed to represent a complete portfolio.

Even so, the group has produced results that I’m incredibly happy with.

Going into the year, the average yield of these picks was 9.23%

Despite this, no position saw a decline in distributions, with some even increasing their payouts (and more increases on the way).

We also saw total returns, inline with the returns of the tech heavy S&P 500!

Absolutely incredible.

We also avoided any of our positions seeing massive drawdowns, which is quite the accomplishment in the high yield space.

While this performance is incredible, our High Yield Portfolio that we run at Dividendology.com has performed even better.

Our High Yield Portfolio is outperforming the market!

But the performance doesn’t tell the whole story.

Not only did this portfolio outperform by a wide margin, but it:

• Had lower volatility (standard deviation)

• Had a lower maximum drawdown

• Had a stronger Sharpe Ratio

The Sharpe Ratio is an important one.

The Sharpe Ratio is a way of measuring how much return you’re getting for every unit of risk you take.

Basically, this portfolio took on less risk than the S&P 500, while still experiencing better returns.

We are incredibly happy with this performance, and are currently investing considerable amount of time and capital on research to continue to unlock the best opportunities in this space.

Let’s review the positions currently in the portfolio:

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Price targets.

In fact, it’s basically tradition for Wall Street’s major banks to issue S&P 500 price targets at the start of every year.

The only thing potentially more common than S&P 500 price targets, is analysts and banks assigning price targets assigning price targets to individual stocks.

However, I’ve never been a huge fan of analysts short term ‘price targets’.

While the below image is a humorous take on price targets, it’s not too far off from how many analysts create price targets.

The reality is that there is a right way and wrong way to issue price targets-

And issuing price targets in the correct manner can reveal companies that have significant upside.

Today, we’ll be creating price targets for four stocks that have the ability to grow 100%.

Let’s dive in.

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🔍 The Issue With Most Price Targets

I enjoy reviewing price targets as much as anyone.

I find them entertaining and potentially insightful at times.

However, what you’ll find is that most price targets are issued with a 1 year time horizon.

This is an issue.

Why?

Because you can only accurately project future returns by looking at stocks through the lens of ‘Sources of Returns’.

As a reminder, stocks have 3 potential sources of returns:

• Earnings per share growth

• Multiple expansion/contraction (Price to earnings ratio growing/shrinking)

• Dividends

For example, here is what the sources of returns look like for the S&P each decade:

Some decades (like the 2010s), earnings growth was the main driver of returns.

Some decades (like the 1980s), multiple expansion was the ultimate driver of returns.

And some decades, when market performance was particularly poor-

Dividends were the main driver of returns, and sometimes the only positive source of returns.

While dividends obviously play a role in calculating total returns, a price target is simply derived by projected future earnings per share, and the future valuation multiple.

This issue with 1 year price targets is that stocks are primarily moved by changes in the valuation multiple in the short term.

It can be incredibly difficult to project changes in the valuation multiple over such a short time period.

Why?

Because in the short term, changes in the valuation multiple are due to a change in sentiment.

But over the long run, share price follows earnings growth.

We can project future cash flows.

But we can’t project short term changes in sentiment around a stock.

And ironically enough, it becomes easier to project future valuation multiples since they are primarily derived from the growth rate of future cash flows-

As well as the predictability of those cash flows.

Therefore, price targets make much more sense over a roughly five year time period.

Let’s create a five year price target for 4 stocks.

1. 💻 Microsoft (MSFT)

Microsoft just released their latest quarters earnings-

Which led to the largest one day change in market value in their history.

The company is spending aggressively to expand its data-center capacity, causing annual free cash flow to decline for two consecutive years.

Despite this spending, Microsoft still generated approximately $67 billion of free cash flow in fiscal 2026.

That separates Microsoft from several other major technology companies that have increasingly relied on debt to finance their AI infrastructure.

Perhaps even more importantly, Microsoft already has substantial contracted demand supporting their increased capex spending.

Commercial remaining performance obligations increased 84% to $678 billion, creating an enormous backlog of revenue that has not yet been recognized.

The issue investors previously had was despite the fact MSFT had a massive backlog, most of that backlog was tied to OpenAI, creating customer concentration risk.

But Microsoft’s AI growth is now becoming more diversified.

Nearly 90% of its full-year cloud revenue came from customers outside frontier-model companies such as OpenAI.

Azure’s growth is now being more driven by broad enterprise adoption, instead of Microsoft relying on one single company (OpenAI).

To build our price target, we will be importing live and historical data into our spreadsheet, as well as importing the average analyst EPS estimates into our sheet using Tickerdata.

Microsoft’s price target is based on two assumptions:

1. Analysts expect Microsoft’s earnings per share to grow from $13.70 in 2025 to $35.77 by 2030, representing annualized EPS growth of approximately 21.2%.

2. The model assumes Microsoft trades at 25 times earnings in 2030.

That is a relatively conservative assumption because it is roughly in line with Microsoft’s current P/E ratio of 25.15 and well below its four-year average P/E ratio of 34.

The calculation is straightforward:

Compared with the current share price of $455.10, that represents approximately 96.5% upside, meaning the stock would nearly double by 2030.

Keep in mind, if we include dividends, this would put Microsoft’s total return during this time period over 100%.

2. 📱 Meta Platforms (META)

Meta stock is one of the worst performing MAG7 stocks in the last year, now down by nearly 30%-

With a 10% drop occurring in the last few days of releasing their earnings report.

Despite this, revenue continues to grow at an exceptional rate for Meta, with revenue increasing by nearly 28% year over year.

Meta’s results are primarily driven by three variables:

• Family daily active people (DAP) – DAP was 3.60 billion on average for June 2026, an increase of 3% year-over-year.

• Ad impressions – Ad impressions delivered across Meta’s Family of Apps increased by 14% year-over-year.

• Average price per ad – Average price per ad increased by 12% year-over-year.

These three combine to push Meta’s Q2 revenue to over $59 billion.

The headline earnings miss on EPS is less concerning after diving into why this occurred.

Meta recorded approximately $2.4 billion in legal charges and $1.18 billion in severance expenses.

Excluding these one time costs, the core business continued to perform well.

Of course, the sell off comes partly as a result of Meta slightly increasing the low end range of their capex guidance.

Management expects 2026 capital expenditures to reach between $130 billion and $145 billion as Meta builds the computing infrastructure required for artificial intelligence.

This spending will very likely push free cash flow into negative territory and ultimately force the company to raise additional capital through the bond market.

The bond market is already beginning to reflect these concerns.

Meta’s five year credit default swap spread has risen considerably in recent months.

A credit default swap acts like insurance against a company failing to repay its debt, so a rising spread indicates that investors are demanding more compensation to take on that credit risk.

The market has become increasingly less confident in the quality of Meta’s debt as the company increases borrowing while committing enormous amounts of capital to AI infrastructure-

Of course, leading to the stock selling off.

Analyst’s are projecting Meta’s earnings per share to increase from $23.98 in 2025 to $54.91 by 2030, representing annualized EPS growth of approximately 18%.

The price-target calculation is:

A 21 multiple is approximately in line with Meta’s current valuation and remains below its four-year average P/E ratio of 22.14.

Compared with the current share price of $547.74, that represents approximately 110.5% upside and an annualized return of roughly 16.1% through 2030, before dividends.

Meta doesn’t need the valuation multiple to increase to see great returns.

It simply needs its earnings to grow as analysts expect while maintaining roughly its current valuation.

3. 🏥 UnitedHealth Group (UNH)

Remember when the market left UNH for dead?

UnitedHealth Group is now up over 68% in just the last year.

To be fair, they still haven’t recovered from their massive sell off in April of last year, when the stock was trading at nearly $600 a share.

The company faced elevated medical costs, pressure within Medicare Advantage, operational problems at Optum Health and a Department of Justice investigation into aspects of its Medicare business.

That, combined with the costs associated with a cyber security attack, led to the first drop in EPS in years for UnitedHealth Group.

Keep in mind, UnitedHealth has confirmed that it is still cooperating with the DOJ’s civil and criminal requests, meaning regulatory uncertainty remains an important risk we need to be aware of.

The central thesis is that UnitedHealth’s current earnings are set to recover to previous levels in the coming years-

As well as the fact that UnitedHealth’s medical care ratio improved to 86.7% in the recent quarter, meaning they’re spending a smaller percentage of its premium revenue on medical claims.

Analysts expect earnings per share to increase from $13.23 in 2025 to $34.29 by 2030, representing annualized growth of approximately 21%.

The price-target calculation is:

The spreadsheet displays a target of $857.13, with the slight difference caused by using unrounded earnings estimates in the underlying calculation.

A 25 multiple is below UnitedHealth’s current P/E ratio of 27.06 and slightly below its four-year average of 26.07, so the price target does not require aggressive multiple expansion.

4. 💾 Broadcom (AVGO)

Is it possible for a stock that is already up 700% in the last 5 years to see another double?

Short answer: Yes.

Stock price movement by itself tells us nothing about the valuation of a stock.

Unlike companies spending hundreds of billions of dollars to construct AI infrastructure, Broadcom primarily benefits by supplying the technology required to build it.

Its products include custom AI accelerators, networking chips and Ethernet solutions that allow enormous clusters of processors to communicate efficiently.

The growth has been remarkable.

The company has grown free cash flow at a compounded annual growth rate of over 31% over the past decade.

Broadcom currently trades at more than 60 times trailing earnings, substantially higher than most companies in the S&P 500.

However, the rate at which they are continuing to grow earnings more than justifies this.

Analysts expect Broadcom’s earnings per share to increase from $4.91 in 2025 to $35 by 2030, representing annualized EPS growth of approximately 48.1%.

The price-target calculation is:

That assumes Broadcom’s valuation contracts dramatically from its current P/E ratio of approximately 62 to only 26.5 by 2030.

In other words, the price target already accounts for significant multiple compression as the company matures.

Compared with the current share price of $385.85, the target represents approximately 140.4% upside and an annualized return of roughly 19.2% through 2030, before dividends.

🎯 Our Price Targets

It’s important to remember that none of our price targets today were vague or based on hype.

In fact, we did quite the opposite.

Using Tickerdata, we took the average EPS estimate from analysts, and then provided a conservative PE ratio based on their historical averages.

So even though each of these stocks had over 100% upside, that is certainly not their best case scenario.

Each of these stocks has the ability to grow their dividend at double digit growth rates in the future as well.

If you want to be able to auto-import stock financials into your spreadsheet and get access to this price target sheet, you can do so at Tickerdata.

⚡Our Dividend Growth Portfolio

The goal of our Dividend Growth Portfolio?

Buy stocks that allow us to benefit from all 3 of the sources of returns.

This is what leads to potential outperformance over the long term.

If you want to be a part of the process of building this portfolio and also get access to everything mentioned below, you can join here:

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Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: ‘HEAT’ FOR 30% OFF)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

This means:

• You get paid whether the market goes up or down

• You get paid without stressing about short-term price moves

• You aren’t forced to sell assets

It’s truly the ultimate sleep-well-at-night strategy.

But if you’re in the early to mid-stages of building your dividend snowball, it’s important to not solely focus on the dividend yield of your investments.

You need to focus on buying stocks with high dividend growth potential.

What gives stocks the ability to grow dividends at a high rate?

Growing free cash flow.

And ironically enough, growing free cash flow at a high rate not only leads to high levels of dividend growth, but it often leads to market outperformance as well.

But did you know there is another group of stocks that have historically outperformed?

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📊 The ‘Other’ Outperforming Group

Dividend growth isn’t the only historical indicator of outperformance.

The other category of outperforming stocks?

Founder-Led Companies, also known as owner-operator stocks.

Over a 14-year period, family-owned businesses consistently outperformed their non-family counterparts.

• The family-owned universe grew to nearly 2.5x (250%) the original value.

• The non-family universe only reached about 1.5x (150%).

The reason for this outperformance is straightforward:

Owners think and act differently from management.

Management thinks about maximizing their next quarterly earnings.

Owners think in decades.

Think of it this way:

The Typical Public Company

• Run by agents, not owners

• Focused on quarterly earnings

• Compensation tied to short term incentives

The Owner-Operator Model

• Management = Shareholders

• Personal wealth is at risk

• Focus on long-term profits and value creation

Basically, skin in the game matters.

📑 56 Owner Operator Dividend Growth Stocks

Many of the companies that are founder led also happen to be dividend growth stocks.

This shouldn’t come as a surprise.

Why?

Because free cash flow growth ultimately leads to dividend growth.

I’ve identified 56 different owner operator dividend growth stocks. 👇

You can download the above spreadsheet of 56 Owner Operator Dividend Growth Stocks here:

56 Owner Operator Dividend Growth Stocks

The median 5 YR EPS CAGR on this list is a strong 13.44%, while the median return on invested capital sits at 15.55%.

Let’s look at a couple case studies.

🧼 Case Study No. 1: Cintas Corporation

Cintas is a great example of how a simple, recurring-service business can become a long-term compounding machine.

The company rents, cleans, and delivers uniforms while also providing products and services such as:

• Floor mats

• Restroom supplies

• First-aid products

• Safety training

• Fire-protection services

None of these services are particularly exciting, but the economics are attractive.

Many customers rely on Cintas every week to collect uniforms, clean them, replace supplies, and maintain workplace-safety equipment.

Once these services are integrated into a company’s daily operations, switching providers can be inconvenient and disruptive.

A business may need to replace uniforms, resize employees, coordinate new pickup and delivery schedules, transfer service records, and retrain staff on a new system.

This creates recurring revenue, strong customer retention, and opportunities to sell additional services to existing customers.

This is largely why their revenue and EPS growth has been so stable-

While simultaneously expanding their margins.

Richard “Dick” Farmer built the modern company, and his son Scott Farmer later served as CEO from 2003 through 2021.

Scott Farmer now serves as executive chairman and beneficially owns approximately 14.4% of the company.

Although Cintas is no longer run by a Farmer family member on a daily basis, the company still has many owner-operator characteristics:

1. Significant family ownership

2. Family involvement at the board level

3. Leadership developed internally

4. A long-term corporate culture

5. Disciplined capital allocation

Current CEO Todd Schneider joined Cintas in 1989 and spent more than three decades inside the organization before taking the top position.

Over the last decade, Cintas had a free cash flow compounded annual growth rate of over 17%-

Which ultimately led to market outperformance as well as explosive dividend growth of over 18% annually.

Cintas generated approximately $11.3 billion in revenue during fiscal 2026 and produced nearly $1.9 billion in free cash flow.

As a result of a decade of exceptional fundamental performance, the market is currently valuing Cintas at a premium.

Earnings growth is projected to remain in the low double-digits over the next few years, but investors would still have to pay 39 times earnings to buy shares at its current valuation.

However, this is essentially in line with their 5 year average P/E multiple.

🚛 Case Study No. 2: Old Dominion Freight Line

Old Dominion Freight Line is another deceptively simple business.

The company transports less-than-truckload freight, combining shipments from multiple customers inside the same trailer and moving them through a nationwide network of service centers.

Executing this well is extremely difficult.

Freight must be collected, routed, transferred, and delivered without significant delays or damage.

Old Dominion’s competitive advantage is the reliability of its network.

The company regularly reports on-time service near 99% and one of the lowest cargo-claims ratios in the industry.

For customers transporting valuable or time-sensitive goods, reliability undoubtedly matters more than choosing the lowest-priced carrier.

Old Dominion was founded in 1934 by Earl and Lillian Congdon.

The Congdon family remains meaningfully involved in the business more than 90 years later.

David Congdon, the founder’s grandson, previously served as CEO and now serves as executive chairman. Members of the Congdon family collectively continue to own a significant percentage of the company.

Like Cintas, Old Dominion’s current CEO is not a member of the founding family.

However, CEO Marty Freeman spent decades inside the company before taking the role.

The company therefore retains several owner-operator characteristics:

• Meaningful family ownership

• Family representation on the board

• Internally developed leadership

• Conservative financial management

Old Dominion operates in a highly cyclical industry.

During freight downturns, many carriers reduce capital spending to protect short-term earnings.

Old Dominion has historically continued investing in:

1. Service centers

2. Tractors and trailers

3. Technology

4. Employees

5. Network capacity

Those investments may reduce free cash flow in the short term, but they allow the company to improve service, handle more freight, and capture market share when demand recovers.

However, revenue per share as well as earnings per share have stalled in the last 3 years.

ODFL’s recent revenue decline has primarily been caused by a prolonged downturn in the freight market.

Manufacturers and retailers have been shipping fewer goods, leading to lower shipment volumes and less freight moving through the company’s network.

ODFL has maintained strong pricing, but higher revenue per shipment has not been enough to fully offset the decline in total volume.

Lower network utilization has also pressured earnings because the company must continue operating its service centers, equipment, and workforce even when fewer shipments are moving through the system.

Despite weaker current results, ODFL’s stock has risen because investors are focused on what earnings could look like when the freight market eventually recovers.

Several factors are driving that optimism:

1. The freight downturn may be approaching a bottom.

   Investors expect shipment volumes and demand to eventually normalize after an unusually long slowdown.

2. ODFL has significant operating leverage.

   Because much of its network is already in place, additional freight can produce revenue without expenses rising at the same rate.

3. The company continues gaining long-term market share.

   Its reliable service and low cargo-claims rate make it one of the strongest operators in the industry.

All of the above are evident in analyst EPS projects, which are currently sitting at over 15% growth annually over the next few years.

In other words, the market is largely looking past today’s weak freight environment and pricing the stock based on an expected recovery in future earnings.

Of course, the risk now is that ODFL’s premium valuation already reflects much of that recovery.

🏁 The Bottom Line

There is significant crossover with Owner Operator stocks and Dividend Growth stocks-

Which makes sense, as long term free cash flow growth eventually leads to dividend growth.

When founders, families, and executives have meaningful personal wealth invested alongside shareholders, they are often more willing to prioritize sustainable growth over short-term results.

Like always if you want to join the largest community of dividend growth and high yield investors, and get access to all the features mentioned below, you can do so here:

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Dividendology

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Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: ‘HEAT’ FOR 30% OFF)

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Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

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💰 Which Income ETF is Best?

The tech heavy QQQ is up an astounding 87.93% in just the last five years.

While the majority of income investors don’t hold QQQ due to its lack of yield-

Many do own the option income ETFs that give them exposure to this index while providing 10%+ yields.

The three most popular as of right now are:

• NEOS Nasdaq-100 High Income ETF (QQQI)

• Goldman Sachs Nasdaq-100 Premium Income ETF (GPIQ)

• JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)

And while the funds may seem similar on the surface level, a closer look will reveal that these funds are built very differently.

Today, we will be deciding which of these High-Yield ETFs is best-

And why there is one ETF that I believe is better than all three.

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💰Performance

Let’s start by reviewing year to date returns for these funds.

As of right now, GPIQ is the clear leader out of the three.

But wait!

That’s just the price return.

The majority of the returns from these funds come from distributions.

So what do year to date returns look like from a total return perspective?

While all three get a significant boost to their returns, GPIQ is still the clear leader, with most of their outperformance coming after March.

This outperformance coming after March is important to note, because it’s a result of the way these funds are structured-

But more on that in just a moment.

If we review the results over a one year time period, GPIQ again is the clear winner whether we look at just price performance or total return.

It’s important to note that these returns must be compared to the returns of QQQ, since that is primarily the underlying index these funds aim to track.

QQQ has a total return of 23.32% in the last year.

So perhaps the most important question is this:

“How much of the upside did each of these funds capture?”

• QQQI: 71.1%

• JEPQ: 80.1%

• GPIQ: 99.3%

GPIQ has managed to capture nearly all of the upside over the last year.

And like mentioned above, this is completely due to the way these funds are structured-

And also plays a major role in the long term sustainability of their distributions.

So naturally, let’s evaluate the way these funds are structured to cause this difference in performance.

⚙️ Portfolio Options Coverage

Do you know what one of the most important metrics for Covered Call ETFs is?

Portfolio options coverage.

We discussed this in our Guide to Covered Call ETFs on Tuesday.

A strategy that writes options against a larger portion of its holdings can generally collect more premium income.

However, it may also retain less participation in the underlying asset’s upside.

A lower-coverage strategy typically generates less premium but allows investors to participate more fully if the asset appreciates.

Financial softwares don’t provide this data, so I’ve gone through ETF prospectuses and fact sheets to compile this data in the Dividendology Covered Call ETF Database.

So what does the portfolio options coverage look like for our three ETFs in review?

1. QQQI: Close to 100%

2. JEPQ: Close to 100%

3. GPIQ: 25% - 75%

This data explains much of the performance gap between these ETFs.

Not only does it explain why GPIQ has outperformed its peers, but it also explains much of the distributions made by these ETFs.

💵 Distributions

Below is the portfolio options coverage, along with the trailing twelve month yield for each fund.

QQQI writes call options against nearly 100% of its portfolio.

Because more of the portfolio is covered, the fund can collect option premiums on a larger amount of assets.

Those premiums help support QQQI’s 13.5% trailing 12-month distribution rate, the highest of the three funds.

The trade-off is that more of the portfolio’s upside is exposed to being capped.

When the Nasdaq rises sharply, QQQI may have to surrender some gains because of the calls it has sold.

This is exactly what happened in late March/early April.

QQQI prioritizes maximizing income today versus maximizing capital appreciation potential.

JEPQ also maintains options exposure near 100%, however, you’ll notice its trailing distribution rate is lower than QQQI, at approximately 10.4%.

Why would this be the case if their portfolio options coverage is the same?

JEPQ uses an actively managed stock portfolio and generates options exposure through equity-linked notes.

Its results are influenced by the securities selected, market volatility, option pricing, portfolio positioning, and the exact terms of its options strategy.

Even though JEPQ covers a large portion of its portfolio, it may collect less premium than QQQI depending on factors such as:

• The volatility of its underlying holdings

• How far out of the money its options are written

• The duration of the contracts

• The timing of option sales

• The fund’s active risk-management decisions

In theory, this should allow JEPQ to pursue a balance between income and reduced volatility rather than simply targeting the highest possible distribution.

However, you’ll also notice this causes their distributions to be substantially more volatile than their peers.

For the investor seeking predictable and stable income, that isn’t ideal.

GPIQ generally writes options against approximately 25% to 75% of its portfolio.

Because a smaller portion of the fund is overwritten, GPIQ collects less option premium than a fund covering nearly 100% of its assets, which explain why its trailing distribution rate is the lowest of the group at approximately 9.7%.

However, the lower coverage ratio leaves more of the portfolio uncapped.

When the Nasdaq rises, a larger portion of GPIQ’s holdings can participate in that appreciation.

As a result of a growing net asset value, it actually allows the fund to support higher distributions over time.

This is essentially what allows Covered Call ETFs to see ‘dividend growth.’

🧾 Taxes

One of the areas these ETFs differ the most is taxes.

Overall tax implications can vary dramatically for each individual-

However, I built out a model where you can change the variables to see what different tax implications could potentially look like for each of these ETFs.

Covered-call ETF payments can consist of several classifications:

• Ordinary income

• Qualified dividends

• Long-term capital gains

• Return of capital

Each category can receive different federal tax treatment.

Keep in mind, the tax classifications for the distributions has the potential to vary every month, and to a wide degree for some ETFs.

Based on the distribution classifications used in our model, substantial portions of QQQI’s and GPIQ’s distributions were classified as return of capital.

Return of capital is generally not taxed as current income when received.

Instead, it reduces the investor’s cost basis.

That can provide a meaningful tax-deferral benefit, especially for investors attempting to live on portfolio income in a taxable account.

However, return of capital is not permanently tax-free.

Because it lowers the cost basis, the investor may recognize a larger capital gain when the shares are eventually sold.

Once the cost basis reaches zero, additional return-of-capital distributions may also become taxable capital gains.

Using a hypothetical single filer earning $80,000 annually, our model produced dramatically different first-year federal tax estimates:

With a W-2 wage on an $80,000 salary, you would likely be paying around $8,770 in federal income tax.

$80,000 in distributions from any of these ETFs would result in less federal tax-

However, GPIQ and QQQI are substantially more tax efficient (at least in year one), potentially reducing your federal income-tax liability substantially in the modeled scenario.

You can get access to the tax sheet and input different variables here.

🏆 Who’s the Winner?

So which of these funds is best?

The reality (like almost always in finance) is that it depends.

Each fund (although similar) solves a different problem.

Here’s an in depth breakdown of the overall of strengths and weaknesses:

To simplify it as much as possible:

• QQQI is best for maximizing income

• GPIQ is best for balancing growth and income

While JEPQ may be less volatile, the fluctuations in distributions and lack of growth make it less appealing than the other two for most investors.

However, we don’t own any of these funds in our High Yield Portfolio on Dividendology.com.

Instead, we’ve elected to own one Covered Call ETF that is radically different in nature to these ETFs.

As a result, our portfolio has outperformed in 2026, while offering a sustainable yield of over 9.3%.

This ETF has been able to:

• Yield 11%+

• Grow distributions

• Grow net asset value

Let’s briefly review this ETF, as well as our outperforming High Yield Portfolio:

Read more

Total assets in U.S. derivative-income funds climbed above $140 billion by the end of 2025, up from less than $10 billion just a few years ago.

However, the vast majority of investors still don’t understand how these funds are structured.

Last year, I sent out a poll asking my newsletter readers how comfortable they felt analyzing and understanding the key metrics for these ETFs/ETPs.

Only 4% felt confident!

Today, we will be taking a deep dive on how Covered Call ETFs/ETPs work-

While using real examples from IncomeShares.

Before we jump in, a special thank-you to IncomeShares for sponsoring today’s newsletter and helping make this educational breakdown possible.

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📘 IncomeShares

IncomeShares is a European provider of high-yield exchange-traded products designed to generate monthly income through options strategies.

Each traditional asset class has limitations for income investors:

1. Growth stocks may pay little or no dividend

2. Real estate can generate income, but direct ownership requires time, expenses, and management

3. Commodities generally produce no income at all

This makes commodities particularly interesting.

Investors may want exposure to gold as a potential store of value, silver as both a precious and industrial metal, or oil as a way to participate in global energy demand.

However, simply owning the asset does not create cash flow.

Commodity option-income ETPs seek to combine exposure to these assets with an actively managed options strategy.

Rather than waiting for the commodity to appreciate, the strategy repeatedly sells options in an attempt to generate recurring income.

Let’s review exactly how they generate income from commodities.

🧩 What Is a Covered Call Option?

A covered call is an options strategy that combines two positions:

1. Owning an asset

2. Selling a call option on that asset

A call option gives its buyer the right, but not the obligation, to purchase an asset at a predetermined price, known as the strike price, before the option expires.

The buyer pays the seller an upfront fee called an option premium.

That premium is where the income comes from.

For example, imagine a gold-linked investment is trading at $300.

An investor owns the investment and sells a call option with a $310 strike price in exchange for a $5 premium.

From there, three basic outcomes are possible:

Covered calls tend to be most attractive in flat, choppy, or moderately rising markets.

To put it even more simply:

• In a powerful bull market, the strategy may underperform the underlying asset because the sold calls limit some of the upside.

• In a flat market, the strategy may outperform because it continues collecting premiums while the underlying asset goes nowhere.

• In a declining market, the premium may allow the strategy to lose less than the asset itself. However, it can still experience meaningful losses because it retains exposure to the underlying investment.

For example, if gold remains range-bound for several months, repeatedly selling calls will produce income that would not exist from simply holding gold.

IncomeShares uses covered-call strategies for its Gold+ Yield and Silver+ Yield ETPs.

Beyond the type of options strategy used, three primary metrics affect how the fund operates.

Let’s review each of them.

📊 1. Portfolio Options Coverage

One of the most important metrics investors must know is portfolio options coverage.

Financial softwares don’t provide this data, so I’ve gone through ETF fact sheets to compile this data in the Dividendology Covered Call ETF Database.

But why is this metric so important?

A strategy that writes options against a larger portion of its holdings can generally collect more premium income.

However, it may also retain less participation in the underlying asset’s upside.

A lower-coverage strategy typically generates less premium but allows investors to participate more fully if the asset appreciates.

This creates a sliding scale between income and growth.

The higher the portfolio’s options coverage, the more likely it is to have:

• More immediate premium income

• Less upside participation

On the flip side, less option coverage means:

• Lower immediate income

• More upside participation

Two products tied to the same commodity can therefore deliver very different results depending on how aggressively they sell options.

⚡ 2. Volatility

Option premiums are heavily influenced by expected volatility.

Therefore, higher volatility typically equals larger distributions.

When the market expects an asset to make larger price moves, option buyers are generally willing to pay more for the possibility of benefiting from those moves.

This helps explain why option-income products tied to volatile assets may advertise larger distribution rates.

The strategy can potentially collect more premium because the underlying asset is expected to move more dramatically.

Gold will at times experience periods of relatively low volatility, while silver can experience much larger price swings.

🎯 3. Option Moneyness

The third important factor is option moneyness, which describes where the option’s strike price sits relative to the current price of the underlying asset.

For call options, there are three main categories:

1. Out of the money: The strike price is above the current market price.

2. At the money: The strike price is close to the current market price.

3. In the money: The strike price is below the current market price.

Why does this matter?

Because moneyness affects both the amount of income generated and how much upside the investor keeps.

To put it simply:

More aggressive strike selection can create more income, but it usually comes at the cost of lower upside participation.

Less aggressive strike selection generally creates less income, but allows the investor to benefit more if the underlying asset rises.

Again, that means two covered-call products tied to the same commodity can have very different return profiles depending on whether they sell out-of-the-money, at-the-money, or in-the-money calls.

🌍 IncomeShares Commodity ETP Lineup

IncomeShares currently offers commodity option-income ETPs tied to copper miners, gold miners, gold, silver miners, silver, uranium, and WTI oil.

The Gold+ Yield and Silver+ Yield ETPs use covered-call strategies, while the other commodity products use a cash-secured put plus equity strategy.

The main takeaway is that these products are not simply passive bets on commodity prices.

They combine commodity exposure with an options overlay designed to turn volatility into recurring income.

Many of their commodity ETPs currently have distribution yields near 12%.

🛠️ P.S. – I Have Something BIG For You…

Dividendology has become the largest dividend investing Substack newsletter in the world over the last year.

Members have gotten access to exclusive tools such as:

• Covered Call ETF Database

• Model Portfolios

• REIT Database

• BDC Database

• Most Upside Dividend Stocks

However, I’m obsessed with providing as much value as possible.

That’s why I’ve been working on something in the background:

A Covered Call ETF database specifically for European investors, as well as expanding coverage of opportunities in European markets.

I believe this will provide tremendous value for European investors.

If you want to get access to this, as well as all the features mentioned below, you can do so here:

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While the Dividend Growth Portfolio is still in its early stages. I’m quite excited about the way our portfolio is shaping up.

Before the addition we made to the portfolio today, here’s how the portfolio was shaping up:

However, after today’s addition, our portfolio gets fundamentally stronger.

On top of this, the valuation of our portfolio drops even lower from a price-to-earnings-growth perspective.

In a market that many would argue is overvalued, we’ve been able to add positions to our portfolio that:

• Are fundamentally healthier than the S&P 500

• Are growing revenues and EPS at a faster rate than the S&P 500

• Trade at a more attractive valuation than the S&P 500

And of course, our portfolio has a higher yield than the S&P 500 while growing dividends at a substantially faster rate.

Our last addition to the portfolio was made in April, and that position is up over 30%!

While it’s fun to see gains in a short period of time, in reality, it means very little.

I’m far more concerned with the quality of the portfolio, and the evolution of the intrinsic value of the underlying holdings in the portfolio.

Let’s review the goals for our portfolio.

🧩 The Portfolio

As a reminder-

The goal of the Dividend Growth Portfolio is simple:

To achieve dividend income growth of 7–10%+ annually, while maintaining capital appreciation in line with or better than the S&P 500 over a full market cycle.

Achieving the above goal would allow us to take full advantage of all of the benefits of dividend growth investing, which you can see here.

Members of Dividendology will be able to view all the holdings of the Dividend Growth Portfolio on Dividendology.com.

💰Our New Buy

The stock we’re adding to our portfolio today has many attractive characteristics, such as the fact they:

• Are projected to grow EPS at a high double digit rate annually over the next 3 years

• Are trading at a PEG ratio substantially below the S&P 500

• Are growing dividends at a double digit rate

It meets the quality criteria, while also trading at an interesting valuation.

This is the fifth purchase for our Dividend Growth Portfolio.

If you haven’t joined already, you can get access to everything pictured below here:

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Now, let’s dive into our fifth Dividend Growth addition…

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Members will get access to the full list every month, as well as all other Dividendology features.

This month, only 53 stocks made the list.

Let’s dive in.

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1. 💻 Microsoft (MSFT)

Wall St. Price Target: $560.42 | Upside: 45.53%

Microsoft has been the worst performing MAG7 stock in 2026.

When looking at a heat map of the S&P 500, they stand out significantly, now down nearly 20% year to date.

The result of this is that Microsoft is now trading at its lowest P/E multiple in the last 5 years-

But at the same time, its near its highest FCF multiple in the last 5 years.

Of course, the cause behind the climbing free cash flow multiple is not any issues with the cash flows the core business is generating.

In fact, operating cash flows grew from $118 billion in 2024 to over $136 billion in 2025.

However, capex spending increased by over $20 billion, leading to a rare decline in free cash flow.

This of course is because the company is spending aggressively to construct data centers, purchase advanced chips and expand the infrastructure supporting Azure and artificial intelligence.

They are competing in the exact same AI race as other hyperscaler stocks, such as:

• Meta

• Amazon

• Oracle

• Google

All of these companies have dramatically increased capex spending to the degree where free cash flow between the five of them is projected to be nearly zero over the next 12 months.

However, one of the companies is continuing to generate meaningful positive free cash flow, and that’s Microsoft.

In fact, since essentially all of these companies are spending all of their operating cash flows on capex spending, they are simultaneously having to issue debt to raise capital.

Again however, you won’t see MSFT on this list.

Hyperscalers have issued $350B+ in debt since 2025 to fund AI capex, while Microsoft has issued none.

Microsoft’s biggest advantage is that it can fund this investment cycle more comfortably than most of its competitors.

Other hyperscalers have increasingly relied on bond issuance as their AI spending absorbs or exceeds internally generated cash flow.

Microsoft, by comparison, is expected to remain solidly free-cash-flow positive throughout the investment cycle.

Microsoft can continue investing without taking on the same level of interest expense, refinancing exposure or balance-sheet risk.

Its enormous base of recurring revenue from Microsoft 365, Azure, enterprise software and cybersecurity provides the financial foundation needed to fund AI infrastructure internally.

Consensus projections from S&P Market Intelligence suggest Microsoft’s free cash flow will remain above $50 billion during the investment trough before beginning to spike in 2028.

By 2029, free cash flow could potentially surpass $129 billion as spending growth slows and revenue from the new capacity accelerates.

This creates a potential free-cash-flow inflection point similar to what other capital-intensive technology companies (like TXN) have experienced after completing major investment cycles.

But with the free cash flow projections from S&P Market Intelligence, we can create a very detailed discounted cash flow model.

According to our model, we can see Microsoft would have over 33% upside from current prices.

2. 🏢 Digital Realty Trust (DLR)

Wall St. Price Target: $219.85 | Upside: 25.71%

Digital Realty is a REIT yielding around 2.74%.

While most of the REIT market has been left behind over the last three years, DLR has vastly outperform the Vanguard real estate index.

DLR is a unique REIT, in that it is positioned directly at the intersection of real estate, cloud computing, and artificial intelligence.

The company owns and operates data centers that provide the power, connectivity, and physical infrastructure required by hyperscalers and other large technology customers.

As a result, their projected FFO growth is quite strong, especially relative to the REIT market as a whole.

The recent decline following Digital Realty’s transaction with Blackstone appears to have created an attractive entry point.

Digital Realty agreed to acquire Blackstone’s remaining 64% interest in three data center developments in Northern Virginia.

The properties represent 96 megawatts of capacity and are already fully leased to hyperscale customers under 15-year contracts containing annual rent escalators of approximately 3.6%.

Although Digital Realty is paying a substantial price, the properties are expected to generate an initial stabilized return of above 6.5%.

But here’s what is interesting.

The market currently values Digital Realty’s existing portfolio at an implied return of roughly 5%.

In effect, the company is acquiring new cash flows more cheaply than investors are valuing its own cash flows.

The transaction also allows Digital Realty to bypass one of the industry’s biggest constraints: access to power.

Vacancy in Northern Virginia, the world’s largest data center market, is exceptionally limited.

Acquiring facilities that are already powered, leased and under construction will be considerably more valuable than starting new projects that could face years of permitting, utility and construction delays.

This is in part why AFFO per share is projected to start growing at a faster rate.

On top of this, the dividend is very well covered, and should see strong dividend growth moving forward as AFFO continues to grow at a near double-digit rate.

The primary risk is that Digital Realty must continue issuing shares, forming joint ventures or borrowing money to fund its enormous development pipeline.

However, dilution has been productive so far as core FFO per share has grown faster than the share count.

With record leasing, scarce available capacity and a large contracted backlog, Digital Realty trades at a premium relative to the rest of the REIT market.

They offer a combination of growing dividend income and AI-related growth that very few REITs can match.

3. 📈 Nasdaq (NDAQ)

Wall St. Price Target: $108.64 | Upside: 22.02%

Nasdaq is best known as the exchange where many of the world’s largest technology companies are listed.

However, that increasingly understates what the company has become.

Nasdaq now operates through three primary business segments:

1. Capital Access Platforms

   Capital Access Platforms helps companies and investors access public and private capital markets. This segment includes Nasdaq’s stock-exchange listings, corporate services, real-time and historical market data, investment analytics, and corporate-governance tools. It also owns Nasdaq’s index business, including the Nasdaq-100, and collects licensing fees from ETFs, mutual funds, derivatives and structured products tied to its indexes.

2. Financial Technology

   Financial Technology provides mission-critical software to banks, brokers, exchanges, regulators and other financial institutions. This includes Verafin’s fraud-detection and anti-money-laundering tools, AxiomSL’s regulatory-reporting software, trade-surveillance systems, and Calypso’s trading, clearing, treasury and risk-management technology.

3. Market Services

   Market Services contains Nasdaq’s transaction-based businesses, including U.S. equity and options trading, European markets, fixed-income and commodity platforms, clearing services, trade-management tools and market-data revenue connected to trading activity.

This increasing diversification is important, because Nasdaq is gradually becoming less dependent on trading volume and more reliant on recurring software, data and licensing revenue.

As a result of recurring cash flows, Nasdaq has been an incredibly reliable dividend grower.

They’ve managed to grow dividends at a double-digit rate over the last decade, while keeping the free cash flow payout ratio at just 30%.

At the same time, the business landscape for Nasdaq is shifting dramatically.

The next phase of Nasdaq’s transformation could come from agentic artificial intelligence.

Through Verafin, Nasdaq has introduced AI-powered fraud and anti-money-laundering analysts designed to automate work traditionally performed by compliance employees.

These products are expected to operate as overlays on top of competing legacy systems, allowing financial institutions to adopt Nasdaq’s AI tools without replacing their existing infrastructure.

That could shorten sales cycles and significantly expand Nasdaq’s addressable market.

Instead of selling an entirely new software platform, Nasdaq can offer a digital workforce that improves the systems banks already use.

Nasdaq also possesses a valuable data advantage.

Verafin’s consortium network includes thousands of financial institutions and hundreds of millions of accounts, giving its AI systems access to proprietary financial-crime data that general-purpose models cannot easily replicate.

Early deployments have reportedly reduced sanctions-alert workloads by as much as 90% and enhanced due-diligence time by approximately 50%.

If Nasdaq can price these products according to the labor and operating expenses they eliminate, Financial Technology margins could expand considerably.

If that transformation continues, I believe the company will command a higher valuation multiple that is typically assigned to financial technology platforms rather than traditional exchange operators.

Nasdaq is already trading slightly below their historic valuation multiples.

The average analyst is projecting over 22% upside from current prices.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

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Capital allocation.

A careful review of the capital allocation of three stocks that have historically been viewed as great dividend payers, revealed some major red flags.

Today, we will do the opposite.

We will look at less popular dividend stocks with high yields that pay out sustainable dividends.

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🔍 Where to Look

How many stocks in the S&P 500 currently yield over 5%?

Just fifteen.

How many yield over 6%?

Just five.

The reality of high yield stocks in the S&P 500 is they are often high yield for a reason.

These companies get significant analyst coverage, so there are rarely disconnects with the valuation and the company’s intrinsic value.

And ironically enough, disconnects in valuation are what lead to high yield opportunities that have significant upside.

This is why high yield does not automatically equal high risk.

However, you typically have to turn to alternative high yield asset classes to find these opportunities.

Here are the primary assets we cover to uncover these opportunities:

As you can see, the way we assess dividend sustainability for each of these is different.

In other words, the scarcity of yield in the S&P 500 pushes capital into corners of the market that are less efficient-

Which is exactly where disciplined, income-focused investors can find hidden gems.

Let’s look at just a few examples of sustainable high yields, starting with a stock from the S&P 500.

1. 📡 Verizon (S&P 500)

Verizon is one of the few stocks in the S&P 500 that currently yields more than 6%.

The company is currently only using 57% of its free cash flow to payout dividends.

While dividend growth over the last decade has been below the rate of inflation, Verizon’s 2026 guidance is quite promising.

Verizon expects to grow adjusted EPS at 5-6%, while free cash flow is expected to grow at around 7%.

Naturally, this means that Verizon could grow dividends at 7% over the next year without an increase in the free cash flow payout ratio.

However, that isn’t what I expect them to do.

We will likely continue to see modest dividend growth (which will actually strengthen the payout ratios), but Verizon has already started doing something outside the norm for their capital allocation priorities.

They started buying back shares.

Verizon spent $2.5 billion in share buybacks in Q1 of 2026, compared to $0 last year.

This is a radically different shift compared to the last decade, where shares outstanding were actually increasing.

At the end of 2025, Verizon had approximately 4.226 billion shares outstanding.

Assuming Verizon repurchased shares at an average price of $45:

That would reduce the share count to approximately 4.170 billion.

Before the buyback:

After the buyback:

That means Verizon increased its dividend per share by approximately 1.3% without increasing its total amount of capital it’s using to payout dividends.

Not only are Verizon’s overall dividend payouts strong, their payouts on a per share basis are getting even stronger.

If Verizon achieves just 2.75% dividend growth moving forward, that would imply over 15% upside from current prices.

Now, let’s leave the S&P 500 to find even higher yields with sustainable dividends…

2. 💼 Main Street Capital (BDC)

Main Street Capital is one of the greatest monthly paying dividend stocks of all time, and their historical outperformance proves it.

They’ve paid out monthly dividends since their IPO, and have never cut the base dividend payments.

Right now, their starting yield is sitting at 8.48%.

Main Street Capital is a business development company (BDC), which means they essentially lend money to and invest in small and mid-sized private businesses, then distribute most of the income it earns to shareholders.

This is important to note, as BDCs typically have two yields:

1. Base dividend yield

2. Total dividend yield

The base yield is the yield we should (hypothetically) be guaranteed to get.

Anything above that is considered “special dividends” that depends on how much extra income a BDC is generating in the moment.

Here is Main Street Capital’s dividends paid, as well as special dividends in green.

Base dividends should be more stable, special dividends can fluctuate greatly.

BDCs don’t pay dividends out of GAAP earnings-

They pay from Net Investment Income (NII), which reflects the interest and fees collected on their loan portfolios.

Here is the formula for base dividend coverage:

MAIN recently increased its regular monthly dividend to $0.265 per share.

That equals $0.795 per quarter or $3.18 per year.

The company also pays a $0.30 quarterly supplemental dividend, bringing the total annualized payout to $4.38 per share.

But the regular dividend and supplemental dividend should be viewed differently.

Management expects second-quarter DNII of at least $1.00 per share.

Compared to the $0.795 regular quarterly dividend, that gives MAIN base-dividend coverage of approximately 1.26 times.

In other words, the company is generating about $0.205 more per share than it needs to fund the regular dividend.

That is one of the stronger coverage levels in the BDC market.

However, the same can’t be said for the current supplemental dividend.

The regular and supplemental dividends together total $1.095 per quarter, meaning DNII of $1.00 would leave a shortfall of approximately $0.095 per share.

If DNII remained near $1.00 per quarter, MAIN would generate roughly $4.00 per share annually.

That would comfortably cover the $3.18 regular dividend, but fall about $0.38 short of the full $4.38 payout.

So while the base dividend is one of the safest in the BDC market, the supplemental dividend is not currently covered by NII.

Most investors get misled because most investing software platforms simply show the total yield for BDCs, when the total yield isn’t guaranteed and oftentimes not sustainable.

In reality, MAIN’s base yield is around 6%.

Anything above that is the result of supplemental dividends.

Let’s see if we can find even higher yields with sustainable dividends.

3. 🛢️ Western Midstream Partners (MLP)

Western Midstream Partners was on our list of top high yield stocks to buy going into 2026-

And it’s performed very well since.

The stock was yielding 9.3% at the beginning of the year, yet the stock is already up over 13% in 2026, outperforming the market.

But even with the recent run up in share, the company still yields around 8.3%.

Is that yield sustainable?

For MLPs, we must look at their distributable cash flows.

Western Midstream Partners has strong dividend coverage, with a distributable cash flow payout ratio of just 69%.

With DCF projected to continue to grow, we will likely see some level of distribution growth.

In fact, the company has already announced a distribution increase this year of 2.2%.

WES is a sustainable high yield, that is growing distributions, while outperforming the market.

4. 🏢 Innovative Industrial Properties 9.00% Series A Preferred (Preferred Shares)

Cannabis REITs are considered quite risky due to the weakness of their tenants.

However, the preferred shares, specifically for Innovative Industrial Properties, are a completely different situation.

The preferred shares currently yield 9.2%, and also enjoy some unique advantages:

• Priority over common shareholders: Preferred shareholders must receive their dividends before any dividends can be paid to common shareholders.

• Cumulative dividends: Any missed preferred dividends accumulate and must be paid before the company can resume distributions to common shareholders.

• Greater dividend protection: Innovative Industrial Properties would need to suspend its common dividend before eliminating the preferred dividend, creating an additional layer of protection for preferred shareholders.

Perhaps what is most impressive is this:

The company can currently cover their preferred dividend 48 times over!

Even with some tenant issues, the preferred shares are paying one of the safest 9.2%+ yields I’ve seen.

These are the opportunities that get completely overlooked by the market.

🛡️ The High Yield Lie

It’s true that many high yield stocks are dangerous.

In fact, a majority of them are.

But the idea that all high yields are dangerous couldn’t be further from the truth.

Most people approach high yield investing the same way they play the old game minesweeper.

They start going around randomly clicking on squares, and maybe make a few lucky guesses-

But they are basically guaranteed to hit a mine eventually, ending their game.

Of course, if you know what to look for, you can strategically avoid the mines, and win the game.

This is a perfect metaphor for high yield investing-

And it’s why our High Yield Portfolio has done so well in 2026, while yielding 9.3%.

Like always, if you want to get access to our High Yield Portfolio, as well as the Dividendology Database where we compile in depth data on high yield asset classes-

Then you can join us here:

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It’s capital allocation.

Proper capital allocation is the difference between stocks that:

• Can grow free cash flow and dividends for decades

• Are forced to cut dividends

And right now, there are some very dangerous dividends being paid out from companies that investors have historically viewed as safe.

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📉 Dividend Cuts

Dividend cuts are the worst nightmare for someone looking to live off dividends.

In February of 2024, I wrote an article on 3M stock, and how a future dividend cut was likely.

Keep in mind, at the time I wrote this article, 3M had grown their dividend payments for over 60+ years (making them a Dividend King)-

And had also just recently announced another dividend increase.

So naturally, I got a lot of pushback for this article. 👇

But just a few months later, a dividend cut is exactly what happened.

In a single moment, the payments investors were receiving from 3M were slashed in half.

Devastating.

But leading up to this event, all of the warning signs were there.

This was completely avoidable-

Investors just didn’t know what to look for.

⚡ Sneaky Dangerous Yields

One of the common mistakes with dividend investing is assuming a company that has historically been a great dividend payer will always be a great dividend payer-

Just like 3M.

This most frequently happens with stocks that have the title of ‘Dividend King’ or ‘Dividend Aristocrat’.

A Dividend Aristocrat is an S&P 500 company that has increased its dividend every year for at least 25 consecutive years.

Here is the complete list of Dividend Aristocrat stocks in 2026:

The majority of the companies are healthy, and will likely be able to grow their dividends for decades into the future.

But not all of them.

This is why randomly selecting stocks from this list is so dangerous.

In fact, let’s look at just a few of them that you may be surprised to find out the dividend is in danger.

🚩 Dividend Red Flags

Pepsi has grown dividends now for 53 consecutive years in a row.

In fact, this means it meets the requirements for both Dividend Aristocrat and Dividend King.

Pepsi has historically been considered a durable, defensive business model, that reliably grows dividends every single year.

Take a look at the dividend metrics:

• Yield: 4%

• Dividend Growth: 6%

• 50+ Years of Dividend Growth

On the surface level, everything seems fine.

In fact, Pepsi just recently announced a dividend increase of 4% a couple of months ago, continuing their streak of dividend growth.

But remember, the most important task of management is capital allocation.

In other words, how they choose to use the company’s free cash flow.

As a reminder, management generally has five options for allocating free cash flow:

1. Reinvest in the existing business

2. Complete mergers and acquisitions

3. Pay down debt

4. Repurchase shares

5. Pay dividends

In other words, if a stock has a free cash flow payout ratio of 100%, then it’s using all of its capital to pay out dividends, leaving no capital to reinvest, buyback shares, or pay down debt.

So how has Pepsi’s FCF payout ratio evolved over the last few years?

Pepsi is using all of it’s free cash flow to payout dividends.

There’s a few obvious issues with this.

For one, the company completed last year a nearly $2B acquisition of the Poppi brand.

The only way this type of move could have been made was through a weakening balance sheet, since the company could not use free cash flow to make this move.

Secondly, the company recently issued their 2026 guidance. Here’s what they said to expect:

1. Organic revenue to increase between 2 and 4 percent

2. A free cash flow conversion ratio of at least 80 percent

3. Total cash returns to shareholders of approximately $8.9 billion, comprised of dividends of $7.9 billion and share repurchases of $1.0 billion.

Let’s dissect this a bit further.

Revenue growth is not likely to be above the rate of inflation, and will most likely not come in at 4%, which is the rate they just increased their dividend.

This lack of revenue growth can be made up for if margins are expanding, but Pepsi has guided towards a free cash flow conversion ratio of 80%.

This is down from 93% the previous year.

So revenue is stagnating, while margins are declining.

Despite this, they are paying out $7.9 billion in dividends in 2026, despite the fact free cash flow will very likely not cover this.

This type of capital allocation is simply not sustainable at current levels.

Pepsi’s balance sheet will continue to suffer as they take on more debt to fund their capital allocation priorities.

This is a very similar road that 3M went down.

This doesn’t mean dividend cut in 2026, or even in the next few years.

It does mean if something doesn’t change, the company will continue to get fundamentally weaker, which over time leads to a dividend cut.

⚠️ Another Example

Pfizer is another example.

The company is getting attention right now due to the fact they:

• Are yielding over 7%

• Are trading at historically low valuation levels

• Have a history of dividend growth

But a deeper look into their capital allocation reveals some serious issues.

The free cash flow payout ratio at the end of 2025 was sitting at over 107%, and has been hovering in a dangerous range for over three years now.

That’s not sustainable.

The company also happens to have recently given 2026 guidance, where they indicated they expect no revenue growth, or even the potential for a slight decline.

But here is what perhaps is most ironic:

The company has completed no share repurchases so far in 2026.

Share buybacks are extremely effective when a stock is trading at low valuation multiples, just like Pfizer is right now.

However, because all of their capital is being used to simply maintain the dividend, they can’t pursue this opportunity.

But perhaps most concerning, is the projected continual decline in earnings over the next few years.

If earnings and free cash flow aren’t growing, then dividends can’t grow sustainably.

And if free cash flow is declining while the FCF payout ratio is already above 100% (like Pfizer)…

Huge red flag.

🧼 One More Example

Clorox is currently yielding over 5%, and is a Dividend Aristocrat with over 25 years of consecutive dividend increases.

But look at the FCF payout ratio over the last decade.

It started at just 50%, and hit nearly 125% in 2024, and nearly 80% at the end of 2025.

Again, dividend growth that isn’t backed by free cash flow growth isn’t sustainable.

With their earnings expected to decline in 2026, it’s likely we see the payout ratios climb higher in the coming months.

💰 Sustainable High Yields

There are plenty of high yield opportunities out there if you know where to look.

Many of these opportunities are hidden behind alternative income asset classes.

The Dividendology Database is designed to unlock these opportunities.

For example, MPLX is yielding 7.5%, up over 12.5%, with sufficient dividend coverage!

Management has even guided towards double-digit distribution growth over the next few years.

Of course, this is a simplified view of MPLX, and the way to analyze dividend durability for high yield assets can vary.

You can learn more about analyzing high yield dividends here.

Right now, our model high yield portfolio is yielding 9.3%, has outperformed the market, and has even seen dividend growth from multiple positions in the last year.

🧠 Capital Allocation

Capital allocation will ultimately tell you how a company intends to reward their shareholders, and whether or not a companies dividends are sustainable.

Don’t make the mistake of believing just because a company has historically been a good dividend grower, that it will always be that way.

Management can hide some of the underlying issues on the surface level-

But not if you understand capital allocation and free cash flow.

If you want to take a deep dive into understanding free cash flow, you can click here.

📉 Dividend Cuts

Dividend cuts are the worst enemy for investors looking to live off income.

We must know how to spot the warnings signals before cuts take place.

If you want to get access to the Dividendology Database to help avoid dividend cuts, as well as get access to all the features mentioned below, you can do so here:

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💰 Undervalued Dividend Stocks

At the beginning of each month, I send out a spreadsheet that lists out the dividend stocks that I believe to be undervalued.

This is the end result of 100’s of hours of research every month.

It’s time to dive in.

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1. 📊 S&P Global (SPGI)

S&P Global has had some characteristics of exceptional quality historically:

• Approximately 96% of S&P Global’s revenue is recurring in nature

• free cash flow margin recently reached roughly 35.6%

• Free cash flow per share has also compounded at approximately 16% annually over the past five years

However, the company is down nearly 16% year to date.

This is solely due to a decline in the valuation multiple.

S&P Global is currently trading at a P/E multiple of 23x, which is 21% below their historic average multiple.

But a few things have changed, even in just the last few weeks.

SPGI just completed the separation of their mobility business segment a few days ago.

This is incredibly important in terms of valuation for SPGI.

Why?

Because SPGI contains business segments of vastly different quality.

Its ratings, indices, commodity benchmarks, and proprietary data operations regularly produce operating margins above 50%, while growing at strong rates.

However, the company has been valued more like its slower-growing Mobility division, which owns businesses such as CARFAX and automotiveMastermind and generates margins closer to 40%.

This is where a sum-of-the-parts valuation becomes useful.

Instead of applying one multiple to the entire company, each segment can be valued based on its own margins, competitive position, and comparable businesses.

The ratings division can be compared with Moody’s, while the index business can be compared with MSCI.

Both peers typically receive premium valuation multiples because of their recurring revenue, regulatory advantages, and high margins.

Applying appropriate segment-level multiples and subtracting net debt results in an estimated value of approximately $563 per SPGI share.

This would imply 28% upside from current prices.

The market is currently assigning too little value to the company’s highest-quality assets.

With Mobility trading independently as MBGL, the remaining SPGI business will consist primarily of higher-margin, less cyclical operations.

If the core company receives a valuation closer to Moody’s, the remaining entity alone could be worth approximately $500–$550 per share, before including the value of Mobility.

This dividend king is trading at an attractive value.

2. 🎰 VICI Properties (VICI)

Here’s your fun fact for the day:

REITs and Gold have both outperformed U.S. Stocks since the year 2000.

Of course this is primarily driven by the disaster ‘lost decade’ of the 2000s for equities.

However, the point remains the same:

Investors who view REITs as sub optimal investments are often plagued by recency bias.

VICI Properties has become one of the most compelling opportunities in the REIT market.

The REIT is currently yielding 6.62% and is well covered by it’s growing AFFO.

VICI owns some of the most recognizable gaming and entertainment properties in the world, including Caesars Palace and the Venetian.

It operates primarily through triple-net leases, meaning its tenants are responsible for property taxes, insurance, maintenance, and operating expenses.

These leases also include contractual rent escalators, providing VICI with predictable and gradually growing cash flow.

The company has collected 100% of its rent for years, including throughout the pandemic.

AFFO per share increased from $1.82 in 2021 to $2.38 in 2025, while the company also paid investors an average dividend yield near 5.5% during 2025.

This combination produced double-digit operational returns, even though the declining valuation multiple prevented those results from translating into strong share-price performance.

Today, VICI trades at approximately 10.98 times AFFO, its lowest valuation since the 2020 market crash and roughly 22% below its five-year average.

At the same time, its dividend yield has climbed to approximately 6.6%.

The market’s primary concern is weakening performance among certain casino tenants.

Las Vegas visitation declined sharply in 2025, while some regional Caesars properties experienced lower rent coverage due to increased competition.

However, neither issue has prevented VICI from collecting the rent it is owed.

VICI is also protected by long-term master leases, many of which have approximately 40 years remaining.

These agreements prevent tenants from abandoning weaker properties while retaining stronger assets under the same lease.

Despite the negative sentiment, VICI recently reported 4.5% AFFO-per-share growth and raised its 2026 guidance.

The company maintains an investment-grade credit rating, operates within its targeted leverage range, and has an AFFO payout ratio of approximately 74%, providing comfortable dividend coverage.

Assuming dividend growth of only 3%, a dividend discount model produces an estimated intrinsic value of approximately $33 per share.

That suggests meaningful upside of around 22%, combined with a starting yield of around 6.6%.

Higher interest rates could continue weighing on VICI’s valuation in the short term.

However, the underlying business continues to perform considerably better than the share price suggests.

3. 📡 Verizon Communications (VZ)

Verizon often gets overlooked considering it’s history of slow earnings growth.

It’s certainly not a dividend growth play, but at certain points has offered a high yield with upside as well.

Those are the type of high yield plays we look for when adding to our High Yield Portfolio at Dividendology.com-

Which is currently outperforming the market while yielding 9.3%!

Verizon currently offers a combination of a high starting yield, improving free cash flow, and the potential for earnings growth to accelerate over the next several years.

The company is unlikely to deliver explosive revenue growth, but investors may not need much growth to generate attractive returns from today’s valuation.

Verizon currently offers a dividend yield of approximately 6.5%, with an annualized dividend of $2.77 per share.

Its free cash flow payout ratio sits at just 57%, meaning the dividend remains very well covered, especially for a high yield stock.

But here’s what most investors are currently missing:

Analysts expect Verizon’s earnings growth to accelerate gradually.

EPS is projected to reach $4.94 in 2026, $5.27 in 2027, $5.77 in 2028, and $6.41 in 2029.

That translates into expected annual growth of approximately 5% in 2026, rising to more than 11% by 2029.

Several factors are driving this acceleration:

1. Verizon has moved beyond the most capital-intensive stage of its 5G network buildout, allowing more operating cash flow to become free cash flow. The company can now focus on monetizing its network through wireless pricing, premium plans, fixed wireless, and fiber broadband rather than continually increasing capital expenditures.

2. The Frontier acquisition should also expand Verizon’s fiber footprint and create opportunities for customer growth, lower churn, and cost synergies. Integration expenses and additional debt may limit the immediate benefit, but analysts appear to expect the acquisition to become more accretive over time.

Even modest revenue growth can translate into stronger EPS growth if Verizon improves margins, reduces interest expense, and repurchases shares.

Even if VZ only grows their dividend at 2.75% moving forward, which should be easily attainable if EPS growth is truly anywhere close to projected-

Then VZ easily has over 14% upside at current prices, combined with their starting yield of 6.5%.

Now, let’s jump into this month’s full list.

Read more

The European Stock Index.

Vanguard’s European Stock Index Fund more than doubled the return of the S&P 500 in 2025:

• S&P 500 Total Return: 16.65%

• Vanguard’s European Stock Index Total Return: 36.44%

We highlighted this as an opportunity last year on Dividendology.com, as the valuation spread between U.S Equities and international equities was the widest it had been in years.

But despite this outperformance, International equities are still trading at one of their largest discounts relative to U.S. equities in years.

The S&P 500 trades at a 50% premium compared to international stocks.

Today, we will be looking at some of the best dividend growth opportunities in European markets.

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Valuation 💰

The S&P 500 trades at a rich premium compared to the rest of the world.

• S&P 500 forward P/E: 22.5x

• MSCI World Ex-US forward P/E: 15.0x

To be fair, U.S. equities do deserve to trade at a premium over international stocks.

Historically, U.S. equities have traded at a premium due to faster earnings growth, stronger profitability, a larger concentration of high-growth tech companies, and the relative strength of the U.S. economy.

With that being said, this also creates scenarios where many international stocks get overlooked, creating disconnects from fair value.

For example, one of my best performing stocks over the last year was ASML, a company based in the Netherlands.

At one point last year, the company was trading at a P/E multiple of around 25x.

Their P/E now sits at nearly 47x.

The valuation multiple nearly doubled in the span of just one year!

Not to mention that EPS is growing (and projected to continue to grow) at above 20% annually.

A great example of an opportunity that arose after the valuation got disconnected from their true value.

The company has also stated that growing their dividend is a priority.

European Noble 30 📈

Buying shares of Vanguard’s European Stock Index Fund (VGK) is likely the easiest way to get exposure to European markets.

However, I prefer to hand select the European stocks I hold in my portfolio.

There are nearly 10,000 different publicly traded stocks in Europe.

So how do we narrow down where to start looking for quality dividend stocks?

My friend, European Dividend Growth Investor, created what is known as the European Noble 30 index.

The criteria is straightforward:

1. Must be headquartered in Europe

2. At least 20 consecutive years of paying or growing dividends

3. Market cap above €5 billion

Here are some key stats:

Many of these companies have been around for over a century.

These are 30 high-quality European stocks that make paying dividends a priority.

Using Tickerdata, I built a spreadsheet with in-depth details on the Noble 30 stocks.

You can download this spreadsheet here:

European Noble 30 Sheet

My Favorite International Dividend ETF 🏛️

IDVO is one of the more overlooked income ETFs on the market today.

While it’s technically an international fund, 30% of it’s holdings currently come from Europe.

The fund uses a covered call strategy, but only has portfolio options coverage of 30% - 60% at any given time, allowing for substantial NAV growth.

As a result, the NAV is up 22% in the last year.

And as a result of that, the growth in the distributions has been exceptional.

Keep in mind, IDVO seeks to provide gross annual income of approximately 3-4% from dividend income and 2-4% from option premium-

Making these distributions substantially more sustainable than traditional covered call ETFs.

On top of this, there are other fund issuers, such as IncomeShares, who are actively putting together income products for investors in European markets.

Many of their commodity ETPs are currently yielding close to 12%.

The Problem With European Dividend Stocks 🚩

There is a reason that the index is ‘The Noble 30’ and not ‘The Noble 300’.

Many European dividend stocks do not have the same commitment to rewarding shareholders the way U.S. stocks do.

In fact, most European dividend stocks have a few major differences that make them less attractive than U.S. dividend stocks:

• Payout Frequency

  • Typically annual or semiannual, unlike U.S. stocks which pay quarterly

• Dividend Policy

  • Dividends are often adjusted year to year based on profits

• Withholding Taxes

  • Most European countries impose 15% to 35% dividend withholding taxes

In the spreadsheet above, you can see the data on payout frequency, dividend growth history, and withholding taxes is listed.

🛠️ P.S. – I Have Something BIG For You…

Dividendology has become the largest dividend investing Substack newsletter in the world over the last year.

Members have gotten access to exclusive tools such as:

• Covered Call ETF Database

• Model Portfolios

• REIT Database

• BDC Database

• Most Upside Dividend Stocks

However, I’m obsessed with providing as much value as possible.

That’s why I’ve been working on something in the background:

A Covered Call ETF database specifically for European investors, as well as expanding coverage of opportunities in European markets.

I believe this will provide tremendous value for European investors.

If you want to get access to this, as well as all the features mentioned below, you can do so here:

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Their research and data is used by both retail and institutional investors around the world.

And every few months, they release a list of what they believe are the current top 10 dividend stocks.

Today, we will be assessing the quality of their list.

Let’s dive in.

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🧭 What Type of Dividend Stock?

Did you know that there are sub-categories within dividend investing?

Some people hear the term ‘Dividend Stock’ and immediately think they are referring to high yield stocks.

Some hear that term and think they are referring to dividend growth stocks.

This is where a lot of confusion for investors comes from.

Generally speaking, there are three sub-categories of dividend investing:

1. High-Yield Dividend Investing:

   For investors seeking to maximize dividend income right now

2. Defensive Dividend Investing:

   For investors seeking capital preservation and lower risk

3. Dividend Growth Investing:

   For investors looking to maximize dividend income and returns over the long term

Naturally, we should judge Morningstar’s list based on the sub-category of dividend investing it is designed to serve.

According to Morningstar:

“At Morningstar, we think that the best dividend stocks aren’t simply the highest dividend stocks or the top-performing dividend stocks. We suggest that investors look beyond a stock’s yield and short-term performance—instead, choose stocks with durable dividends and buy those when they’re undervalued.”

Morningstar is not simply selecting the stocks with the highest yields or the fastest dividend growth rates. Instead, it prioritizes companies with durable dividends, strong financial quality and attractive valuations.

This list falls under the defensive category.

🏰 Morningstar’s Top 10

Let’s review Morningstar’s top 10 dividend stock list:

1. PEP — PepsiCo

2. BX — Blackstone

3. USB — U.S. Bancorp

4. ACN — Accenture

5. DUK — Duke Energy

6. MDT — Medtronic

7. MDLZ — Mondelez International

8. AEP — American Electric Power

9. KMB — Kimberly-Clark

10. RF — Regions Financial

Let’s take a closer look at some of the key data from this list:

• Average 5 YR EPS CAGR: 3.67%

• Average P/E Ratio: 16.48x

On average, these stocks are growing earnings at a slow rate.

In fact, if you value them on a PEG (price to earnings growth) basis, these stocks look quite expensive.

The PEG ratio for these stocks is 4.49.

For reference, that means these stocks are more expensive than the S&P 500.

💵 Dividend Metrics

Now let’s review them from a dividend perspective.

• Average Dividend Yield: 3.77%

• Average 5 YR Dividend CAGR: 7.98%

This gives the group an average Chowder Number of almost 12, which is typically considered quite strong.

However, this does not give the full dividend picture.

Notice how the earnings growth rate is lower than the growth rate of the dividends?

That means many of these stocks have unsustainable dividend growth.

Look at a few examples.

Mondelez:

• Mondelez FCF payout ratio in 2018: 47.63%

• Mondelez FCF payout ratio in 2025: 76.88%

Pepsi:

• Pepsi FCF payout ratio in 2015: 51.65%

• Pepsi FCF payout ratio in 2025: 99.56%

Kimberly Clark:

• Kimberly Clark FCF payout ratio in 2023: 57.20%

• Kimberly Clark FCF payout ratio in 2025: 101.28%

Again, many of the stocks on this list have grown dividends at an unsustainable level over the past decade.

Unless earnings and free cash flow growth ramps up dramatically, you should not expect the strong dividend growth to continue.

🌳 Most Interesting Stock on the List?

Accenture may be the most compelling and controversial company included in Morningstar’s selections.

Accenture helps companies improve operations and adopt new technology through consulting, cloud, cybersecurity, AI, and outsourcing services.

It earns revenue from project-based advisory work and longer-term managed-service contracts.

The stock has experienced an enormous decline, falling more than 50% over the past three years, primarily due to the fear of AI disrupting the business model.

At the same time, Accenture has:

• Generated some of the strongest earnings growth on the list

• Increased its dividend at a double-digit rate

• Developed a starting dividend yield near 5%

• Continued generating substantial free cash flow

But what is truly crazy?

The valuation.

Using a reverse DCF model, we can see the market is now pricing in -9.8% free cash flow growth annually for accenture over the next decade.

Despite this, management has guided toward positive free cash flow growth over the next year.

🛡️ Is Morningstar’s List Truly Defensive?

Morningstar’s list clearly emphasizes mature companies they believe are more defensive in nature.

It’s clear they were selecting stocks from the middle of the dividend pyramid.

However, it can be dangerous to assume that traditionally “defensive” companies automatically make defensive investments at any price or under any financial condition.

A company may sell essential products, operate in a stable industry and have decades of dividend history, yet still carry meaningful risk if:

1. Earnings are stagnating

2. Free cash flow is declining

3. The payout ratio has climbed to an unsustainable level

That is the primary concern with Morningstar’s list.

Several of these companies have continued raising their dividends faster than the underlying businesses have grown.

Morningstar’s selections look defensive from an industry perspective, but true dividend safety must be evaluated at a much deeper level.

The vast majority of investors fall under the categories of:

• Dividend Growth

• High Yield

This list certainly does not cater to either group.

This is why we are building real money model portfolios on Dividendology.com for these groups.

If you want to get access to these portfolios, as well as all the features mentioned below, you can do so here:

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Dividendology

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Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: ‘HEAT’ FOR 30% OFF)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

Why?

Because ultimately, it determines the company’s

• Ability to grow dividends

• Strength of its balance sheet

• Ability to buyback shares

• Direction of its stock price

Broadcom is a great example.

However, free cash flow is also one of the most misunderstood financial metrics.

Investors often stop after checking whether free cash flow is growing-

But properly analyzing it requires going several steps deeper.

Today, we’re going to take a masterclass on how to analyze free cash flow.

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💵 What Is Free Cash Flow?

The basic formula is straightforward:

Operating cash flow represents the cash generated by a company’s normal business activities after paying its operating expenses.

For example, the cash Microsoft receives from selling software subscriptions and cloud services contributes to operating cash flow.

However, if Microsoft sold an office building, that would not be considered operating cash flow because selling real estate is not part of its core business.

Capital expenditures, commonly called CapEx, represent the cash a company spends to purchase, build, maintain, or upgrade long-term assets.

These assets can include:

• Factories

• Equipment

• Buildings

• Data centers

• Technology infrastructure

Subtracting capital expenditures from operating cash flow tells us how much cash remains after the company has funded the investments required to operate its business.

That remaining cash is free cash flow.

But the textbook definition only tells part of the story.

A more useful way to think about free cash flow is this:

Free cash flow is the capital management can allocate to increase shareholder value.

That is what makes it so important.

🧭 Capital Allocation

Management generally has five options for allocating free cash flow:

1. Reinvest in the existing business

2. Complete mergers and acquisitions

3. Pay down debt

4. Repurchase shares

5. Pay dividends

Capital allocation is one of management’s most important responsibilities.

The ultimate goal of capital allocation is to maximize shareholder value.

The way capital is allocated to maximize shareholder returns will look entirely different for each company.

A company can generate enormous amounts of cash, but shareholders may still receive poor returns if management does a bad job of allocating that capital.

Want to take a deep dive into how management should decide to allocate their capital?

Check out this flowchart:

📈 Why Dividend Growth Begins With Free Cash Flow Growth

Historical studies have consistently shown that companies initiating or growing dividends have delivered strong long-term results.

But investors should be careful not to confuse correlation with causation.

A company cannot sustainably increase its dividend unless it also grows the cash available to support that dividend.

This is one reason dividend-growth companies have historically performed well:

They are also consistently growing free cash flow.

Microsoft is a strong example.

The company has grown its dividend for years, but that dividend growth was not created out of thin air. It was supported by substantial growth in the underlying free cash flow.

The lesson is simple:

Over the long term, dividend growth must be supported by free cash flow growth.

A company can temporarily increase its dividend faster than free cash flow, but doing so will cause the payout ratio to rise.

Zoetis is an example of this.

The 5 year dividend compounded annual growth rate was strong at above 15%, but it wasn’t backed by free cash flow growth-

So naturally, the FCF payout ratio continued to climb higher, which isn’t sustainable.

Eventually, management will be forced to slow the dividend growth.

🏗️ Not All Capital Expenditures Are Equal

A sudden increase in capital expenditures can cause free cash flow to decline.

Not all capex is created equal.

In general, there are two types of capital expenditures:

1. Maintenance capex is spending required simply to keep the business running at its current level. It preserves existing revenue but does not meaningfully increase future earnings power.

2. Growth capex, on the other hand, is discretionary investment aimed at expanding capacity, unlocking new revenue streams, and increasing long-term cash flow.

Microsoft’s recent infrastructure investments provide a useful example.

Free cash flow declined from 2024 to 2025.

However, we can see this is not due to a decline in operating cash flows, it’s due to a rapid increase in capex spending, specifically, growth capex.

Higher spending on data centers will reduce free cash flow in the short term.

However, much of that spending is designed to support future cloud and artificial intelligence demand.

Therefore, a temporary decline in free cash flow may be acceptable when capital is being invested at attractive rates of return.

The question is not simply:

Did capital expenditures increase?

The better questions are:

• Why did they increase?

• Is the spending required to maintain current operations?

• Is it expected to produce additional revenue?

• What return is management likely to earn on the investment?

• How long will it take for the investment to generate cash?

⚖️ Why Free Cash Flow Is Better Than Net Income

Earnings are an opinion

Free cash flow is fact.

A company can report strong earnings without generating an equivalent amount of cash.

How is this possible?

Let’s look at a few real life examples over the last decade:

Earnings can account for things like:

• Non-cash expenses

• Asset sales

• Restructuring charges

• Depreciation and amortization

• Investment gains or losses

• One-time tax items

• Accounting assumptions

Each of these can lead to earnings being quite misleading, which in turn can make the P/E multiple look misleading.

🧮 Free Cash Flow Per Share

Free cash flow per share is the ultimate measure of intrinsic value.

We believe that long-term growth of free cash flow per share is the ultimate measure to generate value - Haviv Ilan, Texas Instruments CEO

Total free cash flow tells us how much cash the entire company generated.

Free cash flow per share tells us how much of that cash is attributable to each share.

The formula is:

Consider a company generating $100 million in free cash flow with 50 million shares outstanding.

Its free cash flow per share would be:

$100 million ÷ 50 million = $2.00 per share

Now imagine the company generates the same $100 million the following year but reduces its share count to 45 million.

Free cash flow per share increases to approximately $2.22 despite total free cash flow remaining unchanged.

Now consider the opposite situation.

The company grows total free cash flow from $100 million to $110 million, but it issues enough stock to increase its share count from 50 million to 60 million.

$110 million ÷ 60 million = $1.83 per share

Free cash flow per share falls to approximately $1.83.

The free cash flow of the company grew, but the value attributable to each share declined.

This is why investors must analyze financial performance on a per-share basis.

A company can report growth while simultaneously diluting existing shareholders.

📊 Free Cash Flow Margin

Free cash flow margin shows how much of a company’s revenue becomes free cash flow.

The formula is:

If a company generates $100 in revenue and $30 in free cash flow, its free cash flow margin is 30%.

This is one of the most useful measures of a company’s underlying profitability.

Mastercard is an excellent example of a high-quality, asset-light business.

Its free cash flow margin has expanded substantially over time.

This means that not only has Mastercard increased revenue, but a larger percentage of every revenue dollar has become free cash flow.

A company can grow free cash flow in two primary ways:

1. Increase revenue

2. Convert a greater percentage of revenue into cash

The strongest businesses can often do both, and is typically a sign of:

• Operating leverage

• Pricing power

• Greater scale

• Improved efficiency

• A stronger competitive advantage

On the flip side of this, that means declining margins can indicate the opposite, such as rising costs or lack of pricing power.

Revenue growth looks much less impressive when free cash flow margins are collapsing at the same time.

🔄 Free Cash Flow Conversion

Free cash flow conversion measures how effectively accounting profits become actual cash.

A common formula is:

If a company reports $100 million in net income and generates $90 million in free cash flow, its conversion rate is 90%.

That means every $1 of reported profit generated approximately $0.90 of free cash flow.

A conversion rate above 100% is not automatically suspicious.

Free cash flow can exceed net income because net income includes non-cash expenses such as:

• Depreciation

• Amortization

• Stock-based compensation

• Certain restructuring or impairment charges

Mastercard has historically converted a very high percentage of its earnings into free cash flow.

This should also provide investors with greater confidence that reported earnings growth will translate into actual cash generation.

However, consistently weak conversion is typically a red flag, especially if the conversion percentage is declining.

It often times indicates aggressive accounting, rising working-capital requirements, poor-quality earnings, or a business that requires substantial ongoing investment.

💰 Valuing a Stock With Free Cash Flow

A discounted cash flow model estimates the value of a business based on the cash it is expected to generate in the future.

The basic process is:

1. Project future free cash flow

2. Estimate a terminal value

3. Discount those future cash flows back to today

4. Add cash and cash equivalents

5. Subtract debt

6. Divide by diluted shares outstanding

The concept is straightforward:

A business is worth the present value of the cash it will generate for its owners.

The most difficult part is estimating future growth.

To see this actually implemented, skip to the 28 minute mark of this video:

🚫 When Free Cash Flow Is Not the Best Metric

Free cash flow is extremely useful, but it is not appropriate for every industry.

1. Utilities

   Utilities often report weak or negative free cash flow because they continuously invest in infrastructure that expands their regulated rate base.

2. REITs

   Free cash flow and net income can be misleading for REITs because real estate depreciation reduces reported earnings, even when property values and rental cash flows remain healthy.

3. Bank Stocks

   Traditional free cash flow is not particularly useful for banks because lending, deposits, and changes in regulatory capital are part of their core operations rather than ordinary working-capital movements.

4. Business Development Companies

   Free cash flow is not the best measure for BDCs because their business involves continuously originating, purchasing, and selling investments.

5. Master Limited Partnerships

   MLPs typically own capital-intensive energy infrastructure, making traditional free cash flow less useful because large capital expenditures can distort the underlying cash available to investors.

Ultimately, investors must understand the underlying business model before applying the same financial metric to every company.

⚠️ Red Flags to Watch

Here are some of the most important warning signs when analyzing free cash flow.

1. Dividends growing faster than free cash flow

2. Total free cash flow rises while free cash flow per share declines

3. Free cash flow margins deteriorate

4. Cash flow depends heavily on working-capital changes

5. Capital expenditures are repeatedly postponed

6. Stock-based compensation is unusually high

✅ The Bottom Line

Free cash flow is the ultimate metric for long term dividend growth investors-

And understanding it (and what to watch out for) is imperative.

That’s why I created a free guide and checklist for you.

You can get it for free here:

Free Cash Flow Guide

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That is a 30x increase!

Of course, a large portion of this growth is coming from ‘option income ETFs’.

In fact, over the last few years, I’ve been building out an in-depth database on Option Income ETFs.

To better understand how OVL compares within the broader option-income ETF landscape, it is helpful to look at the types of funds currently available in the market.

The excerpt below is a sample from the Dividendology Database, which tracks a wide range of option-income ETFs and their characteristics.

Here’s what we believe is the unfortunate reality about the vast majority of these funds:

They are designed by nature to underperform their underlying holdings.

However, I actually recently added a fund to the database that, based on historical total return data since its inception in 2019, has outperformed the S&P 500. Of course, past performance does not guarantee future results.

And today, we’re taking a deep dive into it.

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Disclosure: This newsletter is sponsored by Liquid Strategies, LLC, the investment adviser to OVL. Dividendology has been compensated in cash for this content. Dividendology is not a client of Liquid Strategies and has a material conflict of interest in recommending OVL due to the compensation received. The opinions expressed are those of Dividendology and not of Liquid Strategies. Past performance is not indicative of future results.

🧩 Overlay Shares Large Cap Equity ETF (OVL)

The Overlay Shares Large Cap Equity ETF (the “Fund”) seeks total return.

OVL combines passive large-cap equity exposure with an actively managed, risk-controlled put-selling options overlay designed to generate additional income-

And the current distribution rate is approximately 10.29% (as of May 31, 2026), paid monthly, with an SEC yield of 0.29% as of 5/31/26.

The distribution rate is not a measure of total return or yield. Distributions may include return of capital, which should not be confused with investment income. The fund's distribution policy may change at any time.

Performance shown is total return since fund inception (September 2019) through 5/29/2026. The S&P 500 Total Return Index is shown for comparison purposes only and is an unmanaged index that cannot be invested in directly. OVL’s strategy, risk profile, and holdings differ materially from the S&P 500. Past performance does not guarantee future results. Standardized performance and current month-end returns are available at https://lsfunds.com/etfs/ovl

The fund currently has a five star Morningstar rating. (Overall rating based on risk-adjusted returns among 85 funds in the Derivative Income category as of 5/31/26. See morningstar.com for more details.

But what makes OVL especially interesting is not just the income.

It is the fact that, based on historical data since the fund’s inception in 2019, OVL has actually outperformed the S&P 500 on a total return basis.

Naturally, we should ask how the fund is structured to understand how this performance was achieved, and what factors may influence future results.

💼 Why the Reported Yield Can Look Misleading

If you currently look at the training twelve month distribution rate for OVL on softwares like Seeking Alpha, you’ll notice it shows approximately 6.31% as of 6/10/2026.

Why is that the case?

This is strictly because OVL recently changed its distribution policy.

I recently interviewed the fund’s Head of Advisor Solutions, Eric McArdle, and he stated this:

The team has historically focused on total return as we can see from their website, but recently updated the distribution policy by moving to monthly payments and distributing a greater portion of the fund’s option premium and realized gains, rather than retaining those amounts within the fund. - Eric McArdle

Distribution amounts and frequency may change at any time at the adviser's discretion.

Since the distribution policy update, the fund has seen 10 consecutive weeks of net inflows, meaning investor purchases of fund shares exceeded investor withdrawals during each week.

🔍 How OVL Is Different

Most option-income ETFs generate cash flow by selling covered calls.

The basic idea is relatively simple:

The fund owns stocks and sells call options against those stocks or an index.

In exchange, the fund collects option premium.

The problem is that selling covered calls (options sold against stocks already owned by the fund) usually caps upside.

If the market rises sharply, the fund may not fully participate because it sold away part of that upside.

This is the main reason many covered call ETFs underperform their underlying index over long periods of time.

OVL uses a different approach.

Instead of relying on covered calls, OVL starts with passive exposure to the U.S. large-cap equity market, typically through holdings that may include broad-market ETFs through holdings that may include broad-market ETFs such as Vanguard's S&P 500 ETF (VOO), which represented 100.19% of OVL's portfolio as of June 18, 2026.

So investors still get broad market equity exposure.

Then, on top of that equity exposure, the fund runs a short-term laddered put spread strategy on the S&P 500, using multiple put spread positions that expire at different times and are regularly replaced as they mature.

In a simplified example, if the market is trading at 100, the fund may sell a put option slightly below that level and buy another put option further below as a hedge.

The premium collected from selling the higher-strike put is greater than the cost of buying the lower-strike put.

That creates a net premium.

The fund then continuously recycles these positions every couple of weeks.

This type of strategy can generate income when the market is up, flat, or even modestly down.

The key difference is that OVL is selling puts instead of calls.

That means the fund is not directly capping its upside in the same way many covered call ETFs do.

However, the put spread strategy does carry downside risk. In sharp market declines, losses on the put spreads can partially offset equity gains. No options strategy eliminates market risk.

It helps explain how OVL has been able to generate meaningful income while still participating in equity market upside.

🛡️ Is the Distribution Sustainable?

For income investors, the most important question should not just be how high the yield is.

The real question is whether the income is sustainable-

Which is where many high-yield option-income ETFs struggle.

A fund can always create a high distribution rate in the short term.

But maintaining that distribution while also preserving NAV and delivering strong total returns is much harder.

According to Liquid Strategies, OVL’s goal is not to maximize income at the expense of everything else.

Instead, the fund seeks to provide a combination of high current income and strong total return.

In a prolonged down market, the team has said their goal would be to prioritize consistency and avoid cutting distributions every time the market pulls back.

However, there is no guarantee that distributions will remain at current levels.

Distribution amounts are determined by the adviser and may be adjusted based on market conditions and fund performance.

The idea is that as markets recover, the NAV can recover as well, and the option strategy has the potential to continue compounding over time.

This makes sense, of course, because the S&P 500 has historically climbed higher over the long term, though past performance is no indicative of future results.

Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. One cannot invest directly in an index.

🎙️ Interview with Eric McArdle

Members of Dividendology have access to the ETF Database, where I post interviews with fund managers, and you can see my interview with Eric McArdle from Liquid Strategies there.

If you’d like to get a more in-depth look at the fund, you can do so by watching this video:

OVL Video Breakdown

I’ll be doing another interview with Eric in the future, so if you have any questions you’d like for me to ask, reply to this email and let me know!

If you want to get access to the Dividendology Database, you can do so here:

Subscribe now

That’s all for now.

See you soon!

Dividendology

This newsletter is sponsored by Liquid Strategies, LLC, the investment adviser to OVL. Dividendology has been compensated in cash for this content. Dividendology is not a client of Liquid Strategies and has a material conflict of interest in recommending OVL due to the compensation received. The opinions expressed are those of Dividendology and not of Liquid Strategies. Past performance is not indicative of future results.

The distribution rate is not a measure of total return or yield. Distributions may include return of capital, which should not be confused with investment income. The fund’s distribution policy may change at any time

Must be preceded or accompanies by the prospectus: https://lsfunds.com/hubfs/Regulatory/Prospectus.pdf?hsLang=en

Risk Factors

Investing involves risk and the possible loss of principal.

The Fund invests in options that derive their performance from the performance of the S&P 500 Index. Selling (writing) and buying options are speculative activities and entail greater than ordinary investment risks. The Fund’s use of put options can lead to losses because of adverse movements in the price or value of the underlying asset, which may be magnified by certain features of the options. When selling a put option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is below the strike price by an amount equal to or greater than the premium. Purchased put options may expire worthless and the Fund would lose the premium it paid for the option. The Fund may lose significantly more than the premiums it receives in highly volatile market conditions.

The Fund will invest in short term put options which are financial derivatives that give buyers the right, but not the obligation, to sell (put) an underlying asset at an agreed-upon price and date. The Fund’s use of options may reduce the Fund’s ability to profit from increases in the value of the underlying asset. The Fund could experience a loss or increased volatility if its derivatives do not perform as anticipated or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position.

The SEC Yield represents net investment income earned by the Fund over the 30-Day period expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-Day period.

The Morningstar RatingTM is a quantitative assessment of a fund’s past performance—both return and risk—as measured from one to five stars. It uses focused comparison groups to better measure fund manager skill. As always, the Morningstar RatingTM is intended for use as the first step in the fund evaluation process. A high rating alone is not a sufficient basis for investment decisions. The Morningstar RatingTM is based on a fund’s Morningstar Risk-Adjusted Return (‘MRAR’) measure. MRAR is motivated by ‘expected utility’ theory, whereby an investor ranks alternative portfolios using the mathematical expectation of a function (called the ‘utility’ function) of the end value of each portfolio. With this basis in expected utility theory, investors are firstly, more concerned about a possible poor outcome than an unexpectedly good outcome; and secondly, willing to give up some portion of their expected return in exchange for greater certainty of return. The rating accounts for all variations in a fund’s monthly performance, with more emphasis on downward variations. It rewards consistent performance and reduces the possibility of strong short-term performance masking the inherent risk of a fund. The Morningstar Overall Rating for the fund is based on the weighted average of its 3-year and 5-year Morningstar Ratings. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. (As of 5/31/26)

Morningstar 3-Year Rating: ★★★★★ (85 funds) | Morningstar 5-Year Rating: ★★★★★ (67) | Morningstar Overall Rating: ★★★★★

Exchange traded funds and open-ended mutual funds are considered a single population for comparative purposes.

Past performance is no guarantee of future results and provide.

Members will get access to the full list every month, as well as all other Dividendology features.

This month, only 48 stocks made the list.

Let’s dive in.

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1. 📡 Comcast (CMCSA)

Wall St. Price Target: $33.14 | Upside: 35.25%

Comcast is now down over 58% in the last year-

And the valuation multiple is at historically low levels.

Comcast currently trades at a forward P/E of just 6.82x.

However, the market’s pessimism is not entirely unfounded.

Comcast’s most important business has historically been residential broadband.

Customers pay recurring monthly fees for internet access, creating a sticky, high-margin stream of cash flow.

Unfortunately, increased competition from fiber providers and fixed-wireless services has placed pressure on this business.

During the first quarter of 2026, domestic broadband revenue declined 5% year over year.

The core business is currently in decline, which explains the historically low valuation multiple.

Despite this, Comcast was one of the most frequently bought dividend stocks by super investors ($100M+ in AUM) in the most recent quarter.

While most super investors were buying quality dividend growers like MSFT, Visa, and AVGO-

Comcast was the 8th most bought stock, and by far the highest yielding stock purchased.

Why might this be the case when the core business is in decline?

While most investors primarily associate Comcast with cable and internet, the company also owns a valuable collection of media and entertainment assets.

These include NBC, Universal Pictures, DreamWorks, Illumination, Peacock and Universal theme parks.

Peacock’s paid subscribers increased 12% year over year to 46 million during the first quarter, while revenue increased 71% and surpassed $2 billion.

Theme park revenue as well as studios revenue both grew at over 20%.

While these are certainly smaller business segment’s than the core business, they are still helping offset some of the weakness within traditional broadband and cable television.

With the decline in prices, the company now yields over 5.5%, with historical dividend growth rates of above 7.5%.

At the same time, the free cash flow payout ratio remains below 25%.

While earnings growth is expected to be quite low over the next few years, the company has plenty of room to grow dividends in the future.

Growing the dividend at 4% moving forward would imply an intrinsic value of $29.59, implying almost 25% upside.

2. 🧮 Intuit (INTU)

Wall St. Price Target: $471.76 | Upside: 70.97%

Intuit is one of the most interesting companies on this month’s list.

Why?

Because they are one of the worst performing stocks in the S&P 500 in the last year, down over 63% due to the threat of AI disruption.

The company operates four major financial platforms:

1. TurboTax, the leading consumer tax preparation platform in the United States.

2. QuickBooks, which provides accounting, payroll and payment-processing software to small and midsized businesses.

3. Credit Karma, a personal finance platform with more than 100 million members that generates revenue through financial product referrals.

4. Mailchimp, which provides email marketing and customer relationship management tools for small businesses.

Intuit’s subscription-heavy business model has historically produced highly predictable revenue growth, high margins, and substantial free cash flow.

This is the exact type of capital light business model that has historically outperformed over the last decade.

These are businesses with high margins and generate high returns on invested capital.

However, we seen a drastic shift recently, as asset heavy companies have started to outperform.

In their recent earnings report, management actually raised its full-year outlook to approximately $21.34 billion in revenue and between $23.80 and $23.85 in non-GAAP earnings per share.

However, the concern of business disruption due to artificial intelligence is growing.

In theory, an advanced AI agent could gather information from financial documents, interpret the tax code, identify deductions and prepare a tax return without requiring the customer to navigate traditional tax software.

The same threat applies to QuickBooks.

AI agents could eventually categorize transactions, reconcile accounts, create invoices, manage payroll and produce financial statements.

If these tools become reliable enough, customers may question why they need several separate software subscriptions.

Recent weakness in TurboTax has added to these concerns.

Intuit expects total TurboTax Online units to decline approximately 2% during fiscal 2026, while its share of electronically filed tax returns is expected to decline by roughly one percentage point.

However, the counter argument is that Intuit may also be one of the companies best positioned to benefit from AI.

The company has decades of financial data, trusted relationships with consumers and businesses, and deep integrations with banks, tax authorities and payroll systems.

Intuit has also partnered with OpenAI and Anthropic and is embedding AI throughout TurboTax and QuickBooks.

The valuation has also compressed dramatically from its historical average.

While the market seems to be waiting to see if AI will disrupt Intuit, the average Wall Street price target now gives them over 70% upside after significant multiple compression.

3. 📊 S&P Global (SPGI)

Wall St. Price Target: $537.38 | Upside: 26.72%

S&P Global provides essential financial infrastructure through four core businesses:

1. S&P Global Ratings – One of the world’s largest credit-rating agencies, providing ratings and research on corporate, government, municipal, and structured debt. This segment generates roughly 31% of revenue.

2. S&P Dow Jones Indices – Home to the S&P 500, Dow Jones Industrial Average, and thousands of benchmarks used by ETFs, index funds, pension plans, and derivatives. This segment accounts for roughly 11% of revenue.

3. S&P Global Market Intelligence – Provides financial data, analytics, and workflow tools through platforms such as Capital IQ Pro. This is the company’s largest segment at roughly 33% of revenue.

4. S&P Global Energy – Delivers proprietary pricing, benchmarks, data, and analytics for global energy and commodity markets. This segment generates approximately 15% of revenue.

   

Through these businesses, S&P Global sits at the center of debt issuance, passive investing, commodity markets, and institutional decision-making worldwide.

What makes the business so powerful is its combination of deep entrenchment, recurring revenue, and exceptional cash generation.

Its ratings business benefits from regulatory recognition, decades of credibility, and a highly concentrated competitive landscape.

Its indices are equally difficult to disrupt.

The S&P 500 is not simply a dataset, it’s a globally accepted financial standard embedded into trillions of dollars of ETFs, mutual funds, retirement accounts, derivatives, and investment mandates.

As assets tied to these benchmarks grow, S&P Global collects additional licensing revenue with very little incremental cost.

This creates a beautiful business model.

Despite these advantages, shares have sold off as investors worry that artificial intelligence could disrupt financial data providers.

However, the market may be misunderstanding what S&P Global actually does.

AI can improve data processing and research workflows, but it cannot easily replace regulatory-recognized credit ratings, institutional trust, proprietary datasets, or globally accepted benchmarks.

S&P Global is also set to become a major beneficiary of AI.

The company acquired Kensho in 2018 and has continued investing in AI tools that analyze financial documents, automate workflows, and enhance Capital IQ Pro.

Rather than replacing S&P Global, AI could make its data and platforms more valuable.

S&P Global is also spinning off its Mobility division, which includes CARFAX and other automotive data businesses.

The separation should simplify the company and improve the remaining firm’s growth and margin profile.

Assuming 12% free cash flow growth, which is in line with estimates, SPGI fair value would be sitting at $525.93 according to our DCF model.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

Read more

And created an investable universe using the Dividendology REIT Database.

Today, we’ll be exploring a potentially much more interesting, subcategory of REITs:

Specialized small cap REITs.

These REITs often have:

• Very little analyst coverage

• Misunderstood business models

• Less institutional ownership

This lack of coverage and institutional ownership often results in valuations getting disconnected from the REITs fundamentals, which also leads to high starting yields.

This is a major advantage for investors willing to do the deep research.

Today, we will be analyzing the Top 5 High Yield Small Cap REIT Opportunities-

As well as one we own in our High Yield Portfolio that yields over 10% with strong dividend coverage.

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🧮 REIT Sentiment

Most investors currently write off REITs.

But the reality is this is primarily due to recency bias.

REITs have drastically underperformed the market over the last 5 years-

But historically have provided superior returns to the S&P 500, a fact very few investors are aware of.

As mentioned on Wednesday, the rate environment REITs operate in plays a major role on future returns.

And the high rate environment over the last few years has not been optimal, and it appears it may stay that way for at least the next year.

But quality REITs continue to grow AFFO per share (the driver of intrinsic value for REITs) during high rate environments.

This naturally creates attractive valuations.

This fact, combined with the reality that specialized, small cap REITs already see their valuation disconnected from fundamentals can create incredible opportunities.

Let’s review these top 5 opportunities:

5. 🏬 CTO Realty Growth (CTO)

CTO is a small-cap retail REIT focused primarily on open-air shopping centers in high-growth Sunbelt markets.

The company owns retail properties that benefit from strong demographics, steady tenant demand, and embedded leasing upside.

This is not a struggling mall REIT.

CTO’s portfolio is centered around open-air retail, where demand has remained much healthier than many investors expected

In Q1, CTO reported strong results, including AFFO per share growing by 14% year over year and portfolio occupancy at 95.4%.

Here’s what makes CTO stand out:

• 7.3% dividend yield

• Roughly 9.2x forward P/AFFO

• Sunbelt-focused retail portfolio

• Growing signed-not-open rent pipeline

• Never reduced its dividend

The signed-not-open pipeline is especially important.

CTO finished Q1 with $6.2 million of signed-not-open rent, representing 5.5% of in-place cash ABR, meaning CTO has already signed leases with tenants, but those tenants have not opened yet, so the rent is not fully showing up in current revenue yet.

This gives CTO a built-in organic growth runway, without needing to rely entirely on acquisitions.

Despite yielding 7.3%, the company is currently only using 68.7% of their AFFO to payout dividends, creating strong dividend coverage.

To be clear, CTO still has risks.

Retail is tied to consumer spending, and their Net Debt to Adjusted Ebitda ratio is around 6.4x, a bit higher than we typically like to see.

But CTO appears to be executing well.

The company is growing AFFO per share at a strong rate, improving leasing spreads, recycling capital, and redeploying into higher-yielding opportunities.

At today’s valuation, investors are getting a 7.3%+ dividend yield while paying roughly 9.3x forward AFFO.

At the same time, they are trading at a much lower valuation than their peers, while growing substantially faster.

For a REIT producing double-digit AFFO growth with a Sunbelt retail portfolio, this is a compelling risk/reward setup.

4. 🌿 NewLake Capital Partners (NLCP)

NewLake Capital Partners is a high-yield REIT where fundamentals may be improving faster than the market is willing to price in.

The key catalyst is medical cannabis is moving to Schedule III status at the federal level.

Under Schedule I, cannabis operators were unable to deduct basic business expenses, resulting in effective tax rates of 60–80% and severely constrained profitability.

Schedule III treatment should allow normal deductions, which could lead to immediate improvements in free cash flow, balance sheets, and overall tenant credit quality.

Obviously that is important, as tenant risk is the primary reason NLCP trades at such a deep discount.

Even after the recent rally, NLCP still trades at:

• 7.87x P/AFFO

• Price to book value of just 0.82, meaning the market is valuing the company at 18% less than the value of its net assets

• 11.27% dividend yield

• Net cash position, with more cash than debt

However, the projected drop in AFFO this year puts their AFFO payout ratio right at 90%, which is at the top of management’s target range.

To be clear, NLCP has faced real challenges, including tenant restructurings and vacancies, which explains the depressed valuation.

In the most recent quarter, NLCP had three large cultivation facilities sitting vacant, which pressured AFFO per share.

However, rent collection on the rest of the portfolio remained at 100%, showing that the broader portfolio is still performing well despite the challenges.

Management has also said they are seeing an uptick in interest for the vacant properties, though increased conversations do not guarantee those properties will ultimately be leased.

The stock is cheap because the market is worried about tenant quality, tenant concentration, vacancies, and the specialized nature of cannabis real estate.

But at the same time, Schedule III will improve operator cash flow and credit profiles, the outlook for rent collection, re-leasing, and long-term cash flow stability improves materially.

Another potential catalyst is a major exchange listing.

Management has said roughly 50–55% of annualized base rent is currently derived from medical cannabis activities, which could become important for NYSE or Nasdaq listing eligibility as cannabis regulation evolves.

A major exchange listing would likely improve liquidity and expand the pool of investors willing to own the stock.

NLCP remains a riskier speculative REIT and should be sized appropriately.

Cannabis real estate will likely continue to deserve a higher risk premium than traditional net lease real estate.

If NLCP can simply maintain their dividend at these levels, it would imply over 35% upside from current prices.

3. 🏔️ Alpine Income Property Trust (PINE)

PINE is a small-cap net lease REIT that often gets overlooked because of its size.

It’s only a $350M market cap REIT, so it’s quite small-

But the underlying story is becoming one of the more interesting setups in the small-cap REIT space.

The company owns 125 properties across 31 states, with 99.5% occupancy and a 9.3-year weighted average lease term.

Roughly 50% of annualized base rent comes from investment-grade rated tenants, which is one of the stronger concentrations in the net lease space.

Here’s what makes PINE stand out:

• 6.1% dividend yield

• 57% estimated AFFO payout ratio

• 99.5% occupancy

• 50% of rent from investment-grade tenants

The dividend coverage is by far what is most impressive.

A 6%+ yield with a 57% AFFO payout ratio is rare in the REIT market, especially when you consider the rate this REIT is growing AFFO per share.

Q1 transactions came in at a 14.1% blended initial yield, including a downtown Aspen retail property with a 50-year lease and 1.25% annual escalators, plus a $32M Georgia retail development loan at a 13% rate.

This is where PINE’s small size becomes an advantage.

Smaller transactions that would barely matter for Realty Income or Agree Realty can actually move the needle for PINE.

Net debt to pro forma EBITDA is around 6.6x, which is higher than ideal, so this is another small cap REIT with more leverage.

Typically, we like to see net debt to EBITDA at no greater than 5.5x.

The commercial loan portfolio also adds complexity, with roughly a third of invested capital sitting in loans rather than owned properties.

Those loans yield 13–15%, including some paid-in-kind interest, which means a portion of income is non-cash until the borrower performs.

But the market may be over-discounting those risks.

They’re currently trading at a P/AFFO multiple of just 9.18x, while the projected CAGR for AFFO per share through 2030 is close to 6.2%.

Growing the dividend at just 3.5%, which should be quite easy with the low payout ratio and 6.2% AFFO per share growth, would imply around 20% upside from current prices.

2. 🏗️ AH Realty Trust (AHRT)

AH Realty Trust, formerly Armada Hoffler Properties, is one of the more controversial small-cap REITs in the market today.

The REIT owns a portfolio of mixed-use office and service-oriented retail properties, with a focus on walkable communities, grocery-anchored retail centers, and high-growth markets.

But the bigger story is the strategic transformation currently underway.

Historically, AHRT operated with a development-first model, generating income from construction contracts, development fees, lending, and one-off transactions.

That worked well in strong markets, but it also created lumpy earnings, more complexity, and more risk when rates spiked and credit tightened.

This eventually led to AFFO not covering the dividend, which forced the company to cut the payout.

Now, under CEO Shawn Tibbetts, AHRT is reshaping the business.

The company is selling its multifamily portfolio, exiting construction and lending operations, reducing leverage, and refocusing around its core retail and mixed-use office properties.

Here’s what makes AHRT stand out:

• 8.2% dividend yield

• Roughly 50% discount to estimated NAV

• Insiders own over 10% of the business

• ~96% occupancy

• Simpler retail and mixed-use office strategy

The key idea is that AHRT is becoming a cleaner REIT.

The two biggest historical problems were leverage and complexity.

By selling non-core assets and using proceeds to reduce debt, management is trying to strengthen the balance sheet.

And by exiting construction, lending, and multifamily, AHRT should become easier for investors to understand and value.

The management team recently stated:

“While 2026 represents a transition year for the company, I want to underscore that throughout this period, we continue to maintain full dividend coverage from the cash flows generated by our operating properties, while also meaningfully reducing debt.”

Importantly, the underlying property portfolio is still performing reasonably well.

If management successfully simplifies the business, reduces leverage, and proves the dividend is sustainable, AHRT could eventually be re-rated to a much higher valuation multiple.

Finally, let’s review the number 1 specialized small-cap REIT.

This is a REIT we added to our High Yield Portfolio when it was yielding over 10%, with extremely strong dividend coverage, and we’re already up 11% on this position.

Let’s take an updated look at it:

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Constellation: -47%. ServiceNow: -55%. Figma: -81%.

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Dividendology readers can now unlock this report for free!

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📊 Generating BIG Dividends With REITs!

Entering into 2026, I made it clear that I was quite bullish on the REIT sector as a whole.

While we could point to a multitude of reasons as to why this was, the overall thesis was simple:

REITs were trading at one of their lowest valuations relative to equities in over 20 years.

When REITs have traded at a discount of -2.0x or greater to U.S. equities, the average forward returns have been impressive:

• 1 year later: +25.6% for REITs vs. +21.0% for U.S. equities

• 2 years later (annualized): +18.7% vs. +12.7%

• 3 years later (annualized): +13.9% vs. +12.8%

As we entered into 2026, they were trading at a 7.7x discount, which is one of the steepest discounts in history.

So far, the thesis has played out quite well, as the VNQ (the Vanguard real estate index) has outperformed the tech heavy S&P 500 year to date.

With that being said, the REIT sector is still trading at a substantial discount relative to equities and relative to historical REIT valuations.

This outperformance trend may not be over yet.

However, the market environment REITs are operating in has shifted dramatically, and not all REITs are set to benefit.

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📈 Shifting Market Environment

Every year, we invest well over $10,000 to get in depth research, reports, and data to provide for members of Dividendology.

Entering into 2026, Morningstar reported that two-thirds of REITs were trading at a matieral discount to their fair value estimates.

It’s important to note that historically, REIT performance has closely followed movements in the 10-year Treasury yield.

The chart below shows two important things.

• The red line is the market yield on the 10-year U.S. Treasury.

• The blue line is the inverse relative performance of U.S. REITs compared to the broader U.S. stock market.

When the blue line is moving lower, REITs are generally outperforming the market.

When the 10-year Treasury yield rises, REITs typically come under pressure. Higher rates can increase borrowing costs, make acquisitions less attractive, and create more competition from bonds and cash-like instruments.

But when the 10-year Treasury yield falls, the opposite tends to happen.

Lower rates can reduce the pressure on REIT balance sheets, make their dividend yields more attractive, and support higher valuations across the sector.

However, as I’ve pointed out many times this year, target rate probabilities for 2026 have shifted radically in the last few months.

We entered into the year with the market expecting three rate cuts-

But probabilities now show a 65% chance of a rate hike.

This shift creates a strong gravitational effect that pulls equities (particularly REITs) downward.

However, quality REITs continue to grow AFFO per share during these periods, meaning the company becomes stronger, while the valuation becomes more attractive.

Let’s create a simple REIT investable universe to take advantage.

📌 Dividendology REIT Database

The Dividendology Database is available for members of Dividendology.

But today, I’m sharing a portion of it with everyone.

There are currently 33 REITs being tracked in the REIT Database.

Let’s see if we can use our investable universe screen to narrow this down.

We want to look for REITs that are fundamentally strong, so to start, we look for AFFO per share growth.

🗂️ 1. Growing AFFO Per Share

When we want to see if a stock is growing intrinsic value, we see if they are growing free cash flow.

When we want to see if a BDC is growing intrinsic value, we see if they are growing tangible book value per share.

And if we want to see if a REIT is growing intrinsic value?

We see if they are growing adjusted funds from operations per share.

AFFO per share is the ultimate metric for REITs.

Let’s filter out all REITs that do not have positive AFFO per share growth over the past 7 years AND filter out any REIT not projected to grow AFFO per share at least 2.5% annually moving forward.

All of a sudden, we went from 33 REITs down to 18.

💸 2. Growing Dividends

The majority of people investing in REITs are buying them for their high yields.

So naturally, we need to make sure those dividends are sustainable.

Let’s filter out all REITs that have a forward AFFO payout ratio of above 85% AND a yield of at least 3%.

Now, we are left with just 9 REITs!

📑 3. Balance Sheet Health

Finally, we must assess the health of the REITs balance sheet.

In reality, this would require analyzing things like:

• Total debt vs. market cap

• Secured vs. unsecured debt

• Fixed-rate vs. variable-rate mix

• Weighted average interest rate

• Debt ladder

• Leverage ratios

These are things I discuss in my 46 minute video on how to analyze REITs.

But since we’re simply running screens, we will use our credit ratings.

We can see that all the REITs we’ve filtered down to already have an investment grade credit rating.

💥 4. Valuation

Finally, we must assess the valuation.

Valuations for REITs have been so compressed, that every single REIT in our investable universe is trading below its 5 year average P/AFFO multiple!

The average discount is 19.9%.

Obviously there is more to assess when it comes to valuations, and the rate at which they can grow AFFO per share heavily impacts the multiple that REITs deserve to trade at.

But with that being said…

It’s clear valuations are vastly more attractive now than they have historically been.

If we look at just a few of the more popular REITs on the list, we can see despite the fact the REIT market has climbed 11.5% year to date, their valuation multiple is still at historic lows.

🔑 Our Universe

With the help of the Dividendology Database, we were able to quickly spot where some of the best potential opportunities in the REIT market are by creating an investable universe.

The trends are easy to spot for most people.

Taking advantage of them is not always quite as easy.

Creating an investable universe removes roughly 80% of the work required.

As we continue to build out our Dividend Growth and High Yield Portfolios, we will filter out the weeds and look for quality.

If you want to be a part of the process of building these portfolios and also get access to everything mentioned below, you can join here:

Subscribe now

Here’s everything you’ll get as a Dividendology member 👇

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Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: 'HEAT' FOR 30% OFF)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Now currently running their Summer sale ($30 off! + 7 day free trial)

The Dividend Report 📊 (Free Newsletter for Straightforward Dividend Stock News)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

In just 13 years, he turned $18 million into over $14 billion.

That’s a return of 29.3% per year.

One of his secrets?

Turning over the most rocks.

I did something rare at the beginning of this year.

I sent out a poll to the 90,000 people who subscribe to this newsletter asking these three simple questions:

1. What are your top Dividend Growth stocks for 2026?

2. What are your top High Yield stocks for 2026?

3. What are your top funds/ETFs for 2026?

I heard back from many of you-

And in total, the Dividendology community submitted over 400 unique stocks and funds!

As we approach the midpoint of 2026, let’s review how the community picks have performed.

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💎 The Top 5 Dividend Growth Stocks

Dividend growth stocks are the best friend of the long-term investor.

Why?

Because historically, they’ve provided outperformance while having less volatility-

All while eliminating sequence risk by paying you a growing stream of dividend income.

Let’s review what the top 5 dividend growth stock picks were from the Dividendology community at the beginning of 2026:

1. Microsoft (MSFT)

2. ASML (ASML)

3. Broadcom (AVGO)

4. UnitedHealth Group (UNH)

5. Mastercard (MA)

Here’s a closer look at each one:

The picks from the Dividendology community certainly had the characteristics of high quality dividend growers.

These companies are growing earnings & dividends at a high rate, while generating exceptional return on invested capital.

What’s even more impressive?

The fact that these companies on average have outperformed the S&P 500 so far year to date.

• Dividendology Community Top 5 DG Picks: +15.66%

• S&P 500: 11.02%

This is a great example of how just a few great investments can drive meaningful outperformance.

🍬 Wisdom of Crowds

Our community stock picks outperforming the S&P 500 is a great example of ‘The Wisdom of Crowds’.

What do I mean by this?

A classic example of the wisdom of crowds is guessing the number of jelly beans in a jar.

Individually, most people’s guesses are wrong.

Some guesses come in way too high, others way too low.

But when you average all the guesses together, the crowd’s average often ends up surprisingly close to the true number.

As the Dividendology brand has grown into one of the largest dividend growth and high yield investing communities, we will continue to leverage our community size to take advantage of the wisdom of crowds.

💰 The Top 5 High Yield Stocks

One of the goals of Dividendology over the last year has been to prove that high yield doesn’t automatically mean high risk.

So far, that goal has gone incredibly well.

We launched our real money High yield Portfolio that currently yields 9.3% and has outperformed the market on a time weighted basis.

Not only is this portfolio outperforming, but it:

• Has had lower volatility (standard deviation)

• Has had a lower maximum drawdown

• Has had a stronger Sharpe Ratio

The Sharpe Ratio is an important one.

The Sharpe Ratio is a way of measuring how much return you’re getting for every unit of risk you take.

Basically, we took on less risk than the S&P 500, while still experiencing better returns.

An amazing start.

How have our communities top 5 high yield picks turned out so far in 2026?

Let’s review what the top picks were, as well as what their yield was at the start of the year:

The average dividend yield of these picks at the beginning of the year was close to 7%.

It’s difficult to compare metrics for these High Yield stocks, as we have 4 different asset classes on this list:

1. Traditional stocks

2. REITs

3. BDCs

4. MLPs

The reality of the market is that you often have to turn to alternative asset classes to find high yield opportunities-

And the way you analyze each of these different asset classes is radically different from traditional stocks.

So how has the communities picks turned out so far?

The average YTD total return of these 5 high-yield picks is currently 6.97%.

A very nice return for a group of high yield stocks.

Main Street Capital (MAIN) is bringing this average down considerably.

Without MAIN, these picks would’ve outperformed.

The BDC market as a whole has seen a considerable drawdown over the last year, with the VanEck BDC Income ETF (BIZD) down over 20%.

This has been primarily due to two reasons that I’ve been warning readers of over the last year:

1. Declining rates leading to lower net investment income

2. Overexposure to software companies in their portfolio

The BDC market has already changed dramatically over the last few months, as I pointed out just a few weeks ago.

Our High Yield Portfolio has certainly benefited from selecting some great high yielding companies, but we’ve also benefited from avoiding the BDC market.

As the market environment changes, we will continue to take a closer look into the BDC market to see if any opportunities arise.

🪨 Turning Over The Most Rocks

“The person that turns over the most rocks wins the game” - Peter Lynch

With the Dividendology community submitting over 400 unique stocks and funds, there are plenty of rocks for us to continue turning over.

That’s the edge of our community.

If you want even more out of the community and access to all the features mentioned below, you can join here:

Subscribe now

See you soon!

Dividendology

Check out these resources:

Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: 'HEAT' FOR 30% OFF)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

This is the end result of 100’s of hours of research every month.

It’s time to dive in.

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1. 🌿 NewLake Capital Partners (NLCP)

NewLake Capital Partners is one of the most interesting high-yield REITs on the market right now, yielding over 11%.

NLCP is a cannabis-focused REIT, which means its properties are highly specialized and its tenant base is much more limited than a traditional net lease REIT. If a tenant runs into financial trouble, re-leasing a cannabis cultivation facility is not nearly as simple as replacing a tenant in a retail or industrial property.

However, the key catalyst is cannabis moving toward Schedule III status at the federal level.

Under Schedule I, cannabis operators were unable to deduct normal business expenses due to 280E taxation, resulting in effective tax rates of 60–80% and severely constrained profitability.

Reclassification would allow normal deductions, which should lead to immediate improvements in free cash flow, balance sheets, and overall tenant credit quality.

Tenant risk is the primary reason NLCP trades at such a deep discount, so this would be a major catalyst.

In the most recent quarter, NLCP had three large cultivation facilities sitting vacant, which pressured AFFO per share.

However, rent collection on the rest of the portfolio remained at 100%, showing that the broader portfolio is still performing well despite the challenges.

Management has also said they are seeing an uptick in interest for the vacant properties, though increased conversations do not guarantee those properties will ultimately be leased.

This is the core risk/reward setup.

The stock is cheap because the market is worried about tenant quality, tenant concentration, vacancies, and the specialized nature of cannabis real estate.

But if rescheduling improves operator cash flow and credit profiles, the entire risk profile of the business could improve materially.

This could lead to stronger tenants, easier re-leasing, better rent collection, and potentially improved access to capital for the broader cannabis industry.

Another potential catalyst is a major exchange listing.

Management has said roughly 50–55% of annualized base rent is currently derived from medical cannabis activities, which could become important for NYSE or Nasdaq listing eligibility as cannabis regulation evolves.

A major exchange listing would likely improve liquidity and could expand the pool of investors willing to own the stock.

Even after the recent rally, NLCP still trades at just 7.98x P/AFFO.

They also trade with:

• An 11.32% dividend yield

• An AFFO payout ratio of roughly 82%, near the low end of management’s 80–90% target range

• A net cash position, with more cash than debt

Even though AFFO per share is projected to drop slightly over the next year, it should still well cover the dividend.

Unlike most REITs, NLCP carries virtually no debt.

That gives the company far more flexibility than the average high-yield REIT, especially in a higher-rate environment.

To be clear, NLCP remains risky.

Rescheduling is not a magic fix.

Even if cannabis moves to Schedule III, the industry will likely remain volatile, and cannabis real estate will probably continue to deserve a higher risk premium than traditional REIT sectors.

NLCP already owns long-term leases with annual rent escalators. If the industry backdrop improves, the market may be forced to re-rate the stock closer to a more normalized valuation.

If NLCP can simply maintain their dividend at these levels, it would imply over 35% upside from current prices.

2. 🌲 Rayonier (RYN)

Rayonier is one of the more unique dividend stocks on the list because it gives investors exposure to a very different type of asset:

Timberland.

The company owns more than 4 million acres of land across the United States, giving shareholders exposure to hard assets, timber, real estate development, solar optionality, and other higher-and-better-use opportunities.

But in the last 5 years, this REIT is down 42%.

The market appears to be valuing the company more like a cyclical lumber business than a scarce land platform.

That disconnect likely stems from near-term weakness in housing, pressure on lumber prices, and the company’s increased exposure to wood products following the PotlatchDeltic merger.

Lumber manufacturing is a much more cyclical, lower-margin business than simply owning timberland.

Sawmills have higher fixed costs, less pricing power, and more exposure to swings in lumber prices. This is one of the key risks investors need to monitor going forward.

But the core timberland business is structurally different from most commodity businesses.

Unlike crops that must be harvested within a short window, trees can be left in the ground when pricing is weak.

In many cases, waiting can actually increase value, because trees continue to grow in volume and can move into higher-value product categories over time.

That gives timberland owners a level of flexibility that many commodity producers do not have.

The bigger opportunity, however, is Rayonier’s land optionality.

Rayonier owns land that can be monetized through higher-and-better-use projects, including master-planned communities, rural land sales, solar projects, conservation, carbon capture, recreation leases, and other land-based solutions.

The real estate segment is especially important because it can generate far higher margins than timber operations. Projects like Wildlight in Florida, Heartwood near Savannah, and Chenal Valley in Arkansas show how Rayonier can turn ordinary timberland into much more valuable development land over time.

Valuation is where the thesis gets interesting.

Rayonier currently trades at a rare discount to Weyerhaeuser, its closest publicly traded peer.

A sum-of-the-parts approach also suggests the market may be giving very little credit to Rayonier’s underlying land value and HBU opportunities.

When you break the company apart, the value is not just in the current timber cash flow.

There is value in the Southern timberland, Northwest timberland, development land around projects like Wildlight, potential solar acreage, and the wood products business.

Even using conservative assumptions, the estimated net asset value appears meaningfully higher than where the stock trades today.

That means investors may be getting the core timberland business at a discount while paying very little for the upside from solar, real estate development, carbon capture, and other land-based opportunities.

The dividend is another part of the appeal.

Rayonier’s base dividend yield is above 5%, and management has also discussed a special dividend following asset sales.

The company has also repurchased stock and could continue buying back shares if the public market discount to private market value persists.

To be clear, Rayonier is not a perfect dividend growth stock.

Its dividend has been uneven, the lumber market is cyclical, housing remains under pressure, and the PotlatchDeltic merger adds more exposure to manufacturing.

But for investors looking for real asset exposure, timberland, land optionality, and a stock trading at a meaningful discount to estimated private market value, Rayonier looks like an interesting long-term opportunity.

3. 💳 Mastercard (MA)

Mastercard is a great example of a capital-light compounding machine.

However, over the last year, Mastercard has significantly underperformed the S&P 500.

The stock has fallen double digits while the broader market has moved much higher.

That type of underperformance is unusual for a company that has historically been one of the best compounders in the market.

But the underlying business itself has continued to perform well.

Over the last five years, Mastercard’s earnings per share have grown by roughly 150–160%, while the stock price has only increased by a fraction of that.

When earnings grow much faster than the share price, the valuation naturally compresses.

Mastercard is now trading near its lowest valuation multiple in the last five years, despite still being expected to grow earnings at a strong double-digit rate.

The reason Mastercard deserves a premium valuation is because of the quality of its business model.

Mastercard is not a lender.

It does not take credit risk like a bank.

Instead, it operates one of the largest payment networks in the world and earns fees from transaction processing, cross-border volume, assessments, data services, fraud tools, and other payment-related services.

This creates an incredibly capital-light business with very high margins.

From a dividend perspective, the company:

• Yields 0.70%

• 10 YR Dividend CAGR of 15.68%

• FCF Payout Ratio of 16.30%

Let’s address a few of the concerns.

The market primarily has three concerns at it relates to Mastercard:

1. Regulatory risk

2. Stablecoins

3. Agentic commerce

The first concern is regulation, especially around credit card interest rates.

But again, Mastercard does not earn its money from interest income.

That risk would primarily fall on the banks issuing the credit cards, not the payment network itself.

Another concern is stablecoins.

The fear is that blockchain-based payments could bypass Visa and Mastercard.

This misses the real value Mastercard provides.

Mastercard is a global trust layer for payments, providing fraud detection, identity verification, compliance, tokenization, dispute resolution, settlement, and merchant acceptance.

Those services may become even more important in a stablecoin world.

The market seems to believe that Agentic commerce is another potential risk, but in reality, it could become a major opportunity.

If AI agents begin making purchases on behalf of consumers and businesses, the number of digital transactions could increase meaningfully.

More transactions should ultimately benefit companies that provide secure payment infrastructure.

Mastercard now trades at a free cash flow yield of 4.19%, meaningfully above their historical average, despite free cash flow projections remaining strong.

That makes Mastercard look especially interesting right now.

If we make conservative assumptions, and assume that:

• Revenue grows at 14% annually

• Operating margins slightly decline

• The P/E multiple sits around 25x, well below their historic average

You’d still be looking at compounded returns of 14.5% annually through 2028.

Now, let’s review the full list for June.

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